HMM Posts Continued Losses, Invests in Mega-Vessels
South Korean ocean carrier HMM announced continued losses on Wednesday, despite higher revenue and rising volumes. The line cited high bunker prices and low freight rates for the poor quarterly performance.
HMM lost about $165 million in the third quarter - less than the $240 million it lost in the second quarter, but much more than the $40 million it lost during the same period last year. Its quarterly volumes increased by 13 percent year over year to about 1.2 million TEU.
HMM did not predict when it might return to profitability, but it forecast a "continuous market uptrend" in U.S. trade - unlike sector leader Maersk, which expects to blank some of its sailings on transpacific routes next year due to the U.S.-China trade war. The two lines' strategies diverge further on newbuildings: HMM has ordered twelve 23,000 TEU megamax boxships and eight 15,000 TEU ULCVs from Korea's "Big Three" shipyards, while Maersk CEO Soren Skou has said that the line has no plans to place large orders for the near future. HMM's newbuilds are underwritten by the Korean government's newly-founded shipping investment vehicle, the Korea Ocean Business Corporation.
HMM says that it will make its "utmost efforts" to find cargoes to fill its new ultra-large vessels before they are delivered, including new cost-cutting measures to strengthen "sales competitiveness." The business case for ULCVs is "crucially dependent" upon high utilization, according to the OECD's International Transport Forum, and competitors like MSC and CMA CGM are also bringing giant megamax vessels online to compete on the Asia-Europe trade lane.
Rising fuel costs were part of the reason for HMM's loss in the third quarter, and bunker prices will only rise further after the new IMO sulfur limit takes effect in 2020. Like many other lines, HMM plans to introduce a bunker adjustment factor to account for the extra cost of low sulfur fuel oil once the rule takes effect.