HMM’s operating profit to fall 80% in 2023 on easing freight rates

South Korea’s sea flag carrier HMM Co. is expected to suffer an over-80% plunge in operating profit this year due to a downward spiral in container freight rates amidst a global economic downturn.

The Shanghai Containerized Freight Index (SCFI), which is closely followed as global spot rates for container freight, fell below the psychologically important 1,000 mark to 995.16 on Feb. 10 after shedding 11.73 points since a week ago. The last time the index touched the 900 level was June 19, 2020.

The global freight rate barometer hit its historic high of 5,109.60 on January 7, 2022, driven by a rapid recovery in shipping volume from the global economic reopening after years of lockdowns to contain Covid-19 infections.

But it reversed direction late last year on the back of looming economic recession fears spurred on by aggressive global monetary tightening moves and has continued on a downward trend since then.

It is also considered a normalization process after the unusual freight boom during the pandemic, which spurred demand for e-commerce across countries with closed borders, market analysts said.

But as the index dipped below the psychologically important 1,000 level last year, concerns about shipping firms’ profits that hinge on freight rates have grown.  

KOREA’S NO. 1 SHIPPER HMM  

HMM is also expected to see earnings plunge this year as global shipping volume continues to plummet.

Its operating profit for 2022 is estimated at 9.8 trillion won ($7.7 billion) but it is forecast to shrink more than 80% on-year to 1.7 trillion won this year.  

The company reported record-high profits for six consecutive quarters until the first quarter of last year thanks to the surge in freight rates.

But any imminent recovery in shipping supply is unlikely as global central markets still consider inflation more than growth in their rate decisions.  

Write to Seo-woo Jang at suwu@hankyung.com
Sookyung Seo edited this article.