Era of Surplus Reopened

The Hanjin Athens passing Stadersand, Germany on Sept. 12, 2006. (Photo by Morn via Wikimedia Commons)
The Hanjin Athens passing Stadersand, Germany on Sept. 12, 2006. (Photo by Morn via Wikimedia Commons)

 

Major Korean shipping companies, which have been suffering from a chronic recession and big losses, are expected to achieve a surplus during the third quarter of this year. As major shipping companies have gone through difficult financial and human resources restructuring, their performances will turn into a surplus this quarter. This will be the first surplus in the last four years.

According to FnGuide, a securities information company, Hanjin Shipping and Hyundai Merchant Marine (HMM), the big two in the shipping industry, are expected to score 57.7 billion won (US$56.7 million) and 21.1 billion won (US$20.7 million) of operating profits, respectively, during the third quarter this year, thanks to the rising freight in the summer peak season. In this case, Hanjin Shipping will be able to record a surplus for two consecutive quarters following the second quarter, and HMM will be able to establish a foundation for turning into a surplus.

These two companies primarily operate container ships, and their performances have revived as they succeeded in increasing freight for major routs including Asia-Europe and Asia-America. Freight for container ships traveling from Asia to the West Coast of America increased by 24.5 percent to US$2,198 per 1FEU (1FEU = 1 40 fit container) this month, compared to US$1,765 at the end of July.

The performances of bulk carrier companies are also expected to be improved. Pan Ocean already achieved surplus during the first half of this year, and Korea Line is continuing a surplus trend since last year as well. Since these bulk carrier companies are primarily operating long-term contracted cargo, this surplus trend will be maintained unless there are some unexpected variables.

However, as the surplus trend in the shipping industry is largely due to financial and human resource restructuring, improvements in overall market conditions and policy support are critical in order for this surplus trend to continue.

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