Shipping rates ease after 11 weeks of gains, brightening outlook for HMM and PCL

[Financial News] Global ocean freight rates, which had been surging amid tensions between the United States and Iran, have taken a breather after 11 weeks of gains. Still, strong freight conditions throughout the second quarter are expected to drive a clear improvement in the earnings of major Korean shipping companies such as HMM and PCL.
According to the Shanghai Shipping Exchange and the shipping industry on the 14th, the Shanghai Containerized Freight Index (SCFI) stood at 3,184.83 as of the 10th, down 142.04 points, or 4.3%, from the previous week’s 3,326.87. It was the first decline in 11 weeks, since April 24. The SCFI had risen for 10 straight weeks from 1,875.26 at the end of April to early July, posting a sharp gain of 77.4%.
The latest drop was largely driven by a partial recovery in global shipping capacity as vessels that had been stuck in the Strait of Hormuz returned to service. Demand also weakened as shippers on routes to the Americas and Europe, having front-loaded cargo ahead of U.S. tariff policies and the peak consumption season in the third quarter, cut new booking orders in response to high freight costs.
Although the short-term rally in freight rates has cooled, the sharp year-on-year rise in average second-quarter rates has brightened the earnings outlook for Korea’s leading shipping lines.
According to consensus estimates from FnGuide and Hana Securities, HMM’s operating profit for the second quarter of this year is projected at 280 billion won to 340 billion won. That would represent a jump of roughly 20% to 46% from a year earlier. The direct driver of the rebound was the average SCFI for the second quarter, which rose about 42% from the same period last year to 2,336 points.
PCL, which focuses on bulk carriers and tankers, is also expected to post solid results. Based on estimates from FnGuide and brokerage reports, PCL’s second-quarter operating profit is forecast at 140 billion won to 160 billion won, up about 14% to 16% from a year earlier. With bulk and tanker market conditions both improving recently, annual operating profit is also widely expected to surpass 600 billion won.
The shipping industry believes the direction of freight rates in the second half will hinge on risks in the Middle East.
That is because the United States and Iran have again shown signs of military confrontation this month, reviving concerns over passage through the Strait of Hormuz. In fact, only six vessels transited the strait on the 12th, the lowest level in five weeks.
A shipping industry official said, "It is true that freight rates have edged down recently as container ships and other vessels left the strait, increasing global vessel supply," but added, "If clashes between the United States and Iran continue, war-risk insurance premiums for ships are rising, and freight rates could come under renewed upward pressure across all routes, including Europe and the Americas, if the situation drags on."

hoya0222@fnnews.com Kim Dong-ho Reporter