HMM states rising costs remain challenging to narrow losses further
The Korean carrier has reduced its operating loss and prepared for IMO 2020 by installing scrubbers but says uncertainty over cargo volumes will continue due to the concerns over a global economic slowdown, Brexit and the U.S.-China trade conflict.
South Korea’s Hyundai Merchant Marine said that it had revenue of 1.3 trillion won (about $1.1 billion at today’s exchange rate) in the first quarter of 2019, 203.9 billion won or 18 percent more than in the same period last year. The company said the increase was due to both higher volumes and a higher load factor. The company handled 1,087,373 TEUs in the first quarter, 11 percent more than in the first quarter of last year.
Fuel costs, low sulfur oil and US-China War keep HMM results under pressure
The company had an operating loss of 105.7 billion won ($88.8 million) in the first quarter, which was lower than the 170.1 billion won operating loss incurred in the same period last year. HMM attributed the loss to “high bunker costs, the U.S.-China trade conflict and delay in regional rate recovery.” Average bunker fuel cost was $423 per metric ton in the first quarter of 2019, 13.4 percent more than it averaged in the first quarter of 2018.
HMM noted that “liners’ burden of high fuel costs is expected to increase due to the U.S. sanctions against Iran, OPEC agreeing to cut oil production and increased demand of low-sulfur fuel oil” in preparation for the requirement next year by the International Maritime Organization that ships use low-sulfur fuel or be equipped with exhaust gas scrubbers.
New bunker surcharge likely to be implemented in near future
HMM said it expects container carriers to “implement a new bunker surcharge in earnest in preparation for upcoming IMO 2020” and also noted that it has “taken pre-emptive actions towards the environmental regulation through installation of scrubbers on its majority of vessels.”
HMM said volumes decreased after the Chinese New Year holiday and that there is “intensified competition in the Asia-North America trade lane. The continuous U.S.-China trade conflict is also one of key factors to obstruct the recovery of the market situation.
HMM maximizing costing on empty repositioning of containers
“Uncertainty over the cargo volumes will continue due to the concerns on a global economic slowdown, Brexit and the U.S.-China trade conflict,” the company said, adding “Given rising demand during peak season, both freight rate and container volumes are highly likely to increase in the second and third quarters.”
HMM said it plans to increase profitability by reducing repositioning costs for empty containers and maximizing utilization of terminals and vessels.