S.Korea: Shippers see bad times continuing

Concerns in the nation’s shipping industry are rising as companies see no end in sight for their struggles. The shipping industry had been doing well just last year,

with competitive oil prices and huge global demands. But the same factors have backfired this year, with skyrocketing oil prices and an excess number of ships causing a huge drop in shipping fees and profits.
The big three shipping companies - Hanjin Shipping, Hyundai Merchant Marine (HMM) and STX Pan Ocean - recorded losses in the first quarter and are expecting to continue to be in the red.
HMM was the first to announce bigger losses in the second quarter, saying on Monday that it recorded 78 billion won ($74.1 million) in operating losses, compared to a loss of 24 billion won in the first quarter. Analysts say that it will be no different for Hanjin and STX, which will each announce second-quarter results in mid-August.
The second quarter brought a number of challenges for shipping companies, and company officials agree that the problems are continuing.
“The main reason for our struggles is that global shippers, including us, have a huge oversupply of ships that are on European and United States routes, and we also suffered from soaring Bunker C oil prices,” said a Hanjin official. “We expect and hope the coming quarters to be positive as we will be finally starting our peak-season fare from mid-August, which is something that has been pushed back from June.”
Companies including Hanjin are in the process of cutting down on the number of ships and selling them.
According to the Korean Shipowners’ Association, Korean shippers were ranked fifth in the world as of the beginning of this year, behind Greece, Japan, Germany and China.
Unlike the nation’s shipbuilding industry, which has seen record orders and revenue, the shipping industry sees no end in sight to its predicaments, except for hoping that oil prices and shipping fares settle.
“The industry can recover if oil prices suddenly settle, but it is true that we are still worried about the current situation,” said an STX official.
Pirate attacks, which had been a rising concern in the first quarter, are no longer as large an issue as attacks have died down in recent months.
Industry analysts said that despite the current difficult situation, companies should continue to look for improvements since the shipping industry has its ups and downs that can change at any time.
“The second quarter was probably the worst quarter for the shipping industry, but things are expected to slowly turn around toward the end of the year and leading into next year,” said Martin Song, an analyst at Woori Investment & Securities. “Although companies are not enjoying profits now, they should not neglect investments and order more efficient and large ships. I know that the top Korean shippers are already preparing funds for such investments.”
Song added that Hanjin’s share price is probably at its lowest, while HMM stock has remained strong.
Source: Joongang Daily