S.Korea’s HMM expands bulk carrier fleet
HMM Co., South Korea’s top shipping company, is expanding its fleet, especially bulk carriers, for stable profits amid the sluggish global container shipping industry, according to The Korea Economic Daily.
HMM aims to increase the number of bulkers it operates, merchandise ships specially designed to transport unpackaged cargo to 55 by 2026 from 29 as of end-2022. It has already added six bulk carriers this year and plans to introduce 11 more next year for the target. In August, it ordered four multi-purpose vessels.
Shipping companies often operate bulk carriers based on contracts for longer terms than deals for container ships, so bulkers provide more stable profits even when the global shipping industry slumps.
HMM signed a $954.2 million deal to charter four bulk carriers to an undisclosed customer from 2026 to 2042, according to its filing to a local financial regulator last week.
HMM’s move came as the global container shipping market is expected to stay under pressure from oversupply for the time being.
The supply glut is predicted to last until 2025 as shipbuilders are scheduled to deliver the largest volume of container ships in years to shipping companies next year. HMM also plans to raise its container fleet to 100,000 twenty-foot equivalent units (TEUs) by 2025 from 80,000 TEUs this year.
The Shanghai Containerized Freight Index (SCFI), a barometer of global freight rates, has been sluggish this year staying around 1,000, a break-even point for shipping companies.
Such weakness is expected to put pressure on HMM, although the company is able to make profits through cost cuts even when the SCFI falls to 900, industry sources said.
The bulk carrier business made up about 40% of HMM’s operation in 2010. But the company, formerly known as Hyundai Merchant Marine taken over by the state-run Korea Development Bank (KDB) in 2016 has sold some of its bulkers to shore up liquidity due to the slump in the global shipping industry.
HMM is trying to improve its business structure by increasing the bulker fleet as it enjoyed an operating profit of nearly 10 trillion won ($7.4 billion) last year.
The company, which South Korea put on sale, is focusing on oil tankers among bulk carriers as it pledged not to work on some cargoes such as iron ore, bituminous coal and liquefied natural gas in the coming years when it sold bulkers for them.
HMM in March ordered three pure car, truck carriers (PCTCs) to a Chinese shipbuilder, the first contract to buy car carriers since it sold a fleet for vehicle transportation in 2002.
The company aims to re-enter the business to take advantage of the growing imports and exports of electric vehicles.
Charter rates for a car carrier, which can transport 6,500 vehicles, have recently surged to $110,000 a day from $10,000 in 2020.
