Bae Jae-hoon, President of Hyundai Merchant Marine, "Year of Rebound... Expecting Operating Profit in 3Q"

"Cost Reduction Continues... Operating Profit to Persist Beyond Q3 if No Major Variables"

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] Bae Jae-hoon, CEO of Hyundai Merchant Marine, said on the 21st, "2020 will be the first year of resurgence with the joining of THE Alliance and the deployment of ultra-large vessels." CEO Bae held his first press conference since taking office at the company headquarters in Yeonji-dong, Jongno-gu, Seoul, on the morning of the same day, stating, "The third quarter of this year is traditionally a peak season and a period when the effects of deploying ultra-large vessels can be seen, so we cautiously expect an operating profit."

Hyundai Merchant Marine posted operating losses for 18 consecutive quarters from the second quarter of 2015 to the third quarter of last year. Although the deficit was reduced to 46.6 billion KRW in the third quarter of last year due to cost-cutting effects, it is still difficult to escape losses in the fourth quarter.

Regarding this year's business environment, CEO Bae said, "Since the beginning of the year, the risk of war between the U.S. and Iran has increased, and uncertainties in the global trade environment such as the U.S.-China trade dispute and Brexit (the United Kingdom's withdrawal from the European Union) have intensified, directly affecting cargo volumes," adding, "The growth rate of shipping capacity will also increase."

Nevertheless, he expressed confidence in securing operating profits, as the effects of joining THE Alliance will be fully realized starting this year. He expects synergy effects to be maximized not only through route cooperation but also through the sequential deployment of ultra-large container ships of 24,000 TEU and 15,000 TEU (a unit referring to one 6-meter container) starting in April.

CEO Bae stated, "With THE Alliance membership, the number of routes on the trans-Pacific route will expand significantly from 11 to 16, and on the Europe route, cooperation will continue on the existing 8 routes," adding, "Since THE Alliance lacks mega container ships, the ultra-large container fleet introduced this year will have a significant advantage in terms of slot (SLOT - container loading space on a ship) costs." He further explained, "Among these, twelve 24,000 TEU vessels will be deployed on European routes, solving both economies of scale and high-cost issues simultaneously, which will generate greater synergy effects within the new shipping alliance," and added, "The increased shipping capacity will be exchanged with member companies of the shipping alliance to jointly fill cargo volumes."

Regarding concerns in the industry about backhaul operations, CEO Bae explained that they are preparing by reinforcing specialized personnel capable of attracting local shippers. He said, "It is quite possible to fill headhaul cargoes from China to the U.S. and Europe, but the key is how much backhaul cargo returning from Europe and the U.S. can be filled," adding, "To address this, we have recruited regional backhaul sales experts, and they will begin full-scale operations starting this year."