HMM Posts Record $2.4B Quarterly Profit

South Korean national shipping line HMM has reported its best quarter ever, bringing in profits of $2.4 billion with a margin of more than 60 percent in the first three months of the year. It is the sixth quarter in a row that HMM has reported a profit, solidifying its turnaround after a years-long run of losses. 

Revenue in the first quarter more than doubled year-on-year, driven by freight rates that have risen by about 75 percent since the same period in 2021. The late-pandemic surge in Western demand and the resulting container-terminal congestion have driven box rates through the roof, though prices have recently begun to subside.

Going forward, HMM predicts continued volatility in the freight market due to the lockdown measures in China and the repercussions of the invasion of Ukraine. In addition, it expects that the upcoming contract negotiations between the U.S. West Coast's longshoremens' union and key terminal operators in L.A. / Long Beach could have an impact on global supply chains.

Though inflation could hurt consumer demand growth in the Asia-North American trade - the biggest part of HMM's business - the line believes that the eventual easing of the Shanghai lockdown will provide a lift to container rates in the months to come.

Unlike some competitors who are blanking sailings in an attempt to shore up pricing, HMM plans to keep extra tonnage in rotation in order to satisfy the needs of South Korea's exporters. The carrier starts some of its sailings from the key South Korean port of Busan, not in China, giving Korean companies the first opportunity to load cargo for ports in Europe or the EU. 

HMM benefits from heavy support from the South Korean government, which is also its main creditor and largest shareholder (via policy bank KDB and state-owned holding company Korea Ocean Business Corporation). Under a plan released last year, the government plans to spend $1.5 billion on financing support for newbuilds, and it is underwriting an order for one dozen 13,000 TEU boxships specifically for HMM. Additionally, policy bank KOBC plans to buy ten ships a year through 2025 and lease them to Korean shipping lines (like HMM) on "reasonable charter rates."

Since HMM's finances have improved and management restructuring is under way, KDB has said that it may consider selling its stake and privatizing the carrier "in phases."