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Cargo crisis

Cargo crisis delivers record earnings for HMM, Korean Air

By May 14, 2021 (Gmt+09:00)

Piles of container boxes waiting to be shipped in the port of Busan, South Korea
Piles of container boxes waiting to be shipped in the port of Busan, South Korea

The ongoing shipping cargo crisis has brought record-high earnings results in the first quarter to South Korea’s largest container line HMM Co. and the leading airline Korean Air Lines Co.

According to the two companies’ regulatory filings on May 14, HMM’s first-quarter operating profit surpassed 1 trillion won ($887 million) for the first time since its establishment in 1976, whereas that of Korean Air recorded 124.5 billion won ($110 million), more than 40% above the analyst consensus estimates.

Since the end of 2020, South Korea is facing a freight crunch after many countries have started to lift their lockdown measures, fueling a drastic recovery in export freight volume amid shortage of container ships.

As the country’s export-oriented firms are failing to ship products overseas due to the container shortage, the ocean freight charges have been skyrocketing ever since.

“Thanks to the rise in global cargo, we saw a 7% increase in shipping volume compared to the same period last year. Also, the rise in freight charge in all routes is driving the recovery of the whole market,” said an HMM representative.

HMM’s first-quarter operating profit of 1.02 trillion won ($904 million) is actually higher than that of the whole year of 2020 at 980.7 billion won ($870 million), which was also the highest annual profit in the company’s history. HMM’s operating profit margin for the first quarter was also high at 42.0%.

HMM’s successful turnaround in recent quarters is a sharp contrast to its continued loss over 20 quarters from the first quarter of 2015 to the first quarter of 2020. Analysts say that the global shipping industry is enjoying a renewed growth thanks to the so-called “revenge consumption”, a phenomenon in which the consumers are on a spending spree coming out of COVID-19.

The analysts highlight that the industry’s representative index on freight charge, the Shanghai Containerized Freight Index (SCFI), has set a new record by reaching 3343.34 points as on May 14. The global freight charge on average, according to the index, is up by 29.3% from a month ago.

The industry projects that HMM’s earnings in the second half of this year will be even higher, as the demand has been traditionally high during this time due to some key dates like Black Friday and Christmas.

“Well, things are just becoming normal again. The freight charge had been abnormally low over the last 10 years,” an HMM official said.

Likewise, Korean Air’s positive earnings are largely driven by the shipping cargo crisis, which in turn are driving demand for air freight. The airline’s first-quarter revenue from its cargo business was 1.35 trillion won ($1.2 billion), more than double that of the same period last year.

Like in the shipping industry, the airline industry also saw a hike in the freight charges. For instance, the standard air freight charge between North America and Hong Kong, based on the industry’s representative TAC Index, was $8.48 per kilo compared to $3.14 per kilo in January 2020. Last year’s highest air freight charge for the route was $7.73 per kilo.

Korean Air says that the second quarter will likely post another earnings surprise as the ongoing shipping crisis is expected to continue. The company said its cash flow will also be improved with the sellout of its large plot of land in the center of Seoul, in Songhyeon-dong, and the sale of the 73-story Wilshire Grand Center in Downtown LA.

The company also projects a rebound in the number of international passengers in the second half with the vaccination programs being implemented all around the globe.

“We will operate international routes flexibly, based on our analysis of vaccination programs’ impact on the international travel demand,” said a Korean Air representative.

Write to Kyung-min Kang at

Daniel Cho edited this article.

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