HMM’s operating profit expected to halve this year

Global shipping rates have plummeted by more than 18 percent since the beginning of the year. Experts in the shipping industry attribute the sharp decline to factors including U.S. President Donald Trump’s tariff policies and an oversupply of global container ships. They predict shipping rates could drop by more than half this year.

According to the shipping industry on Jan. 30, the Shanghai Containerized Freight Index (SCFI) stood at 2,045.45 as of Jan. 24. The index, which is compiled and released every Friday, peaked at 2,505.17 on Jan. 3 but declined by 4 to 8 percent per week for three consecutive weeks, ultimately plunging by over 18 percent. This marks the first time the SCFI has fallen below the 2,050 level since Apr. 26 last year.

The sharp decline was influenced by the resolution of a major labor dispute at U.S. East Coast ports, which had been one of the biggest risks facing the shipping industry. The International Longshoremen’s Association (ILA), representing dockworkers at the U.S. East and Gulf Coast ports, had been negotiating wage increases since last October but had struggled to reach a compromise on welfare benefits, raising fears of a large-scale strike. However, the strike was ultimately called off following a tentative agreement between labor and management.

An industry insider noted, “Some shippers rushed to send cargo to the U.S. in advance of the anticipated mid-January port strike, temporarily boosting freight rates even during the traditionally slow fourth quarter. Now that the strike risk has been removed and inventory accumulation by shippers is complete, freight rates have started to drop significantly since the beginning of the year.”

Experts warn that shipping rates could drop by half compared to last year. Trump’s tariff policies add further downward pressure on rates. If his administration implements blanket tariffs, global trade volume is expected to decline sharply. Many global shippers have already been stockpiling inventory as a precautionary measure in response to the uncertainty surrounding Trump’s tariff policies.

Meanwhile, industry alliances are shifting, with container shipping companies competing aggressively to secure cargo. According to Singapore-based shipping consultancy Linerlytica, MSC and Maersk–the world’s two largest container shipping companies– have already implemented freight rate cuts for shipments scheduled from late January. Last year, global container carriers increased shipping capacity by 8.5 percent, and they plan to expand by another 5 percent this year to gain a larger market share.

Another shipping industry official commented, “If Trump’s tariffs are enforced as he promised, global trade volumes will plummet. Additionally, if stability returns to the Middle East and the Suez Canal reopens, shipping rates could drop by 50 to 60 percent from last year’s peak, significantly deteriorating the profitability of shipping companies.” HMM is estimated to have generated 3.31 trillion won (approximately $2.28 billion) in consolidated operating profit last year, but its profit is projected to decline by half to 1.64 trillion won this year.

Source : Businesskorea