[Click e-Stock] "Container Freight Rates Soar... HMM Performance Set to Rise Further"

Container Freight Rates Surge Over 30% Last Week
Supply Contracts Amid US-China Tariff Policy Changes

As container spot rates (the market price for short-term contracts) continue to remain strong, there are projections that HMM's performance will see further growth. This is attributed to an increase in cargo volume on trans-Pacific routes, driven by the United States' tariff reductions and suspension measures.

On June 4, Daishin Securities raised its target price for HMM by 13% to 26,000 won, citing these factors. The previous trading day's closing price was 22,300 won. The investment opinion was maintained at 'Market Perform' (average market return).

The sharp rise in container freight rates following the agreement between the United States and China to postpone tariff hikes played a decisive role. Last week, the Shanghai Containerized Freight Index (SCFI) reached 2,072, its highest level since January 17. This represents a 30.7% increase from the previous week. Over just the past three weeks, the index surged by approximately 54%, recovering to the 2,000 level for the first time in four months. Notably, freight rates for the US West Coast and East Coast soared by 120% and 87%, respectively, while Europe also saw a 37% rebound. As vessels were redeployed to trans-Pacific routes, supply on non-US routes contracted as a result.

Yang Ji-hwan, a researcher at Daishin Securities, analyzed, "Following the US-China tariff reductions and suspension measures, there was a significant increase in container bookings bound for the US, and general rate increases (GRI) by global shipping companies, including peak season surcharges, also had an impact."

Previously, container cargo volume from China to the US was estimated to have dropped by more than 30% in April due to tariff hikes. In response, shipping companies increased blank sailings and redeployed vessels to other routes, effectively reducing supply. However, with pent-up demand and urgent inventory restocking, there is now a need to return vessels to trans-Pacific routes. Yet, by the time vessels are redeployed, the suspension period may end, making shipping lines reluctant to expand supply. Whether freight rates will rise further will depend on vessel supply conditions. For now, it is expected that in the first week of this month, vessel capacity will increase by 5% compared to the previous week, and in the second week, by about 10%.

Based on these factors, Daishin Securities forecasts that HMM will achieve sales of 10.645 trillion won and operating profit of 1.701 trillion won this year. These figures represent a 1.8% increase in sales and a 2.9% increase in operating profit compared to previous estimates. Yang stated, "Given HMM's higher profitability and competitive fleet compared to global leaders, there is no reason for it to be undervalued. The planned 2 trillion won share buyback and cancellation will also provide support for the stock price."