HMM, Boosted by High Freight Rates... Rising Expectations for Record-Breaking Q3 Performance

Operating Profit Estimated at 1.8186 Trillion KRW
Annual Operating Profit Could Exceed 6 Trillion KRW

[Asia Economy Reporter Dongwoo Lee] Thanks to the soaring global shipping freight rates, the national shipping company HMM is expected to break its record-high performance again in the third quarter of this year.

According to financial information firm FnGuide on the 21st, HMM's consensus (average forecast by securities firms) for the third quarter of this year is an operating profit of 1.8186 trillion KRW, up 556.2% compared to the same period last year, and sales are expected to increase by 98.7% to 3.4161 trillion KRW. Previously, HMM continued its best quarterly performance in 45 years since the founding of its predecessor, Hyundai Merchant Marine, for two consecutive quarters this year.

HMM's strong performance is due to the surge in global cargo volume after COVID-19, with maritime freight rates hitting record highs for 19 consecutive weeks. The Shanghai Containerized Freight Index (SCFI), which aggregates freight rates for 15 maritime container routes, stood at 4622.51 points as of the 17th, up 54.35 points from the previous week.

The securities industry expects this high freight rate trend to continue until the end of the year. This is because the normalization of ports is slower than expected due to the spread of the COVID-19 Delta variant, and the seasonal peak period is approaching with events like Black Friday at the end of the year. The securities industry estimates that HMM's annual sales will reach 12.1693 trillion KRW and operating profit will amount to 5.9352 trillion KRW, supported by the rise in maritime freight rates.

HMM has especially driven its performance by increasing its total fleet capacity by more than 70% compared to last year after receiving a total of 12 vessels, starting with the world's largest container ship, the 24,000 TEU-class 'HMM Algeciras,' in April last year. The operation of eight new 16,000 TEU-class vessels deployed since March this year is also expected to be fully reflected in the third quarter's performance.

The dramatically resolved labor-management wage and collective agreement (wage agreement) earlier this month has also been viewed positively for breaking the quarterly performance record by reducing risks. This year, the labor and management finally signed a wage agreement that includes a 7.9% wage increase and payment of 650% in bonuses and incentives, and they plan to work together to become a global top-class shipping company.

Youngho Kim, a researcher at Samsung Securities, said, "With the increase in cargo volume and the continued congestion, it is expected that the strong freight rates will continue for the time being as it is difficult to expand supply in the short term."