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Trade Wars Impacting South Korean Shipping Lines

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By The Maritime Executive 2019-08-14 20:58:18

South Korea's trade ministry has started the process of dropping Japan from its list of trusted trading partners after on-going disagreement over wartime mistreatment of its citizens. The escalating trade war between the two nations, along with the China-U.S. trade war, is causing South Korean shipping lines concern.

The South Korean government is creating a new category of trading partners especially for Japan, which had previously been in the top-tier category with nearly 30 other nations. These nations benefit from preferential export procedures.

In releasing its half-yearly earnings this week, South Korean shipping line HMM noted the uncertain impact of trade wars on container handling volumes: “Volume increase is expected during the peak season, but global trade uncertainty will persist, attributed to the U.S.-China trade conflict, instability in the Middle East, Brexit and most recently, growing political and trade concern between South Korea and Japan.”

The company has achieved a significant reduction in its operating loss compared to the preceding year, mainly by rationalizing its service network and enhancing operation efficiency. Total revenue in H1 2019 rose 15.4 percent and operating profit improved 40.9 percent “despite the negative impacts caused by high bunker costs, the U.S.-China trade conflict and delay in freight rate recovery.”

According to Clarkson Research Services: “In terms of fundamentals, global seaborne box trade growth appeared relatively soft in the first six months of 2019; clear headwinds from the world economy, including the U.S.-China ‘trade war’, had an impact and projections have been downgraded. Box trade growth is now expected to reach 3.4 percent in TEU terms (2.9 percent in TEU-miles), although significant risks remain and further downgrades are possible.”

Meanwhile, South Korean bulk shipping company PanOcean said a drop in the Baltic Dry Index led to a decline in sales in the second quarter, and the on-going U.S.-China trade war reduced demand for shipping. The company's Q2 net profit dropped slightly from a year earlier due to decreased freight rates.