"Freight Rates Strong on Supply Disruptions; HMM Operating Profit Has Peaked": NH Investment & Securities

[Financial News] HMM's operating profit is expected to exceed the market consensus. However, the gain is attributed to temporarily strong freight rates caused by supply disruptions stemming from seasonal and geopolitical factors. Operating profit is therefore expected to peak in the third quarter before trending downward.
According to NH Investment & Securities on the 4th, HMM's third-quarter revenue is expected to exceed KRW 4 trillion, while operating profit is projected to reach KRW 939.5 billion. Based on operating profit, that would be 42% above the market consensus. The analysis attributed the improvement to strong container and tanker freight rates, despite the decline in the won-dollar exchange rate.
However, the firm viewed the current strength in freight rates as temporary because it has been driven by reduced supply rather than increased global cargo volumes. The Strait of Hormuz was blocked by the war between the United States and Iran, while drought reduced traffic through the Panama Canal. Typhoons also worsened congestion at Chinese ports. Even if abnormal weather continues, traffic through the Red Sea is expected to increase as container shipping enters its off-season, while geopolitical variables are likely to ease. As a result, freight rates are likely to begin trending downward.
Analyst Jeong Yeon-seung noted, "Despite long-term supply pressures, recent conditions in the container market have tended to produce a strong boom compressed into a short period because of external factors." Jeong added, "We believe the effect of reduced supply is having a greater impact than increased demand."
Large-scale newbuilding orders from global container carriers are another factor that could push freight rates lower. Jeong said, "A.P. Moller - Maersk has ordered 26 ultra-large container ships of 18,600 TEU, with one TEU equivalent to a single 20-foot container; China COSCO Shipping has ordered 12 vessels in the 22,000-TEU class from Chinese shipyards; and Yang Ming Marine Transport has ordered six 13,600-TEU vessels from Hanwha Ocean." Jeong forecast, "The vessels are scheduled for delivery between 2029 and 2030. With a substantial increase in supply already scheduled for 2027–2029, any additional orders would prolong downward pressure on freight rates caused by increased supply."

[email protected] Kim Yun-ho Reporter