<\/p>\n
After reporting a 90 percent drop in profits in the first quarter, South Korean container line HMM has promised to cut costs to align with the cooling ocean freight market. <\/p>\n
Volumes on the core east-west trade lanes have plummeted since the late-COVID import boom came to an end last year, and despite carriers' efforts to right-size capacity, rates have fallen precipitously. At HMM, revenue fell 58 percent year-on-year in the first quarter, and profitability dropped even further, down by 90 percent over the same period. To be fair, the line still posted a reasonable profit of $230 million for the quarter, but nothing like the supercharged $2.4 billion profit that HMM posted in the go-go days of early 2022. <\/p>\n
Those days will not be back soon, according to most analysts and executives. The SCFI has fallen back to a normal level of about 1,000 points, 80 percent lower than it was at the same time last year. This is great news for shippers and consumers, but it means a return to lower profits for ocean carriers. <\/p>\n
HMM predicts a protracted period of low demand, driven by inflation in energy and raw material costs. The carrier believes that a downward trend in the global economy will continue, and sees "no encouraging sign of restoring consumer confidence in the near term."<\/p>\n
To match its overhead to the business environment, HMM plans "a wide range of cost-cutting measures and enhance operational efficiency" to ensure competitiveness. Competitor Maersk has issued similar guidance, advising that it is focused on "proactively managing costs."<\/p>\n
With the container segment cooling, HMM may soon be expanding into a hotter segment of the shipping industry: LNG carriers. Its former LNG shipping operation was spun off a decade ago to raise funds, but last week, HMM gave notice of intent to enter into bidding to repurchase the business from current owner IMM Holdings.<\/p>\n