HMM Signs 10-Year Long-Term Crude Oil Shipping Contract... Expanding Bulk Business

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] HMM is expanding its bulk business, including crude oil transportation. With the container ship business getting back on track following the recovery of the shipping industry after COVID-19, this move is interpreted as an effort to diversify its portfolio through bulk business expansion.

According to the industry on the 28th, HMM announced that on the 26th it signed a long-term cargo transportation contract (CVC) to transport crude oil from GS Caltex and Saudi Arabia to Korea for 10 years. To this end, HMM is investing 243.3 billion KRW to lease three Very Large Crude Carriers (VLCCs) ordered by GS Energy from Hyundai Samho Heavy Industries to transport crude oil.

According to HMM's third-quarter report last year, the container segment accounted for 87.25% of its total business areas. The bulk segment, including crude oil and dry bulk, accounted for only 9.58%. This is due to HMM selling off non-container businesses one after another to secure liquidity during last year's shipping industry restructuring.

The industry views HMM's renewed expansion into the bulk business as an attempt to diversify its portfolio. Last year, container ship freight rates surged thanks to COVID-19 and expansive fiscal policies of various countries, and recently, as the global economy shows signs of recovery, demand for raw materials such as crude oil, steel, and grains is also expected to rise.

An industry official said, "During the period when a chicken game was taking place in the container ship market, the bulk ship market had some room, but HMM suffered double difficulties as its bulk segment shrank," adding, "As the global economy enters a recovery phase this year and demand for crude oil and dry bulk increases, this appears to be an effort to secure stable sources of profit."