The maritime freight rates crossing the Pacific Ocean continue to rise despite an increase in shipping capacity (carrying capacity), leading to an upward revision of HMM's performance outlook. This is due to a significant increase in demand to ship goods to the United States as the tariff war between the United States and China has temporarily paused. However, there are forecasts that the rising freight rate trend may not continue as the tariff war is not completely over.
According to the shipping industry on the 5th, the maritime freight rate from Shanghai, China, to the U.S. West Coast was $5,172 per 1 FEU (1 FEU refers to one 40-foot container) as of the 30th of last month, marking a 57.9% increase compared to the previous week. This figure is nearly double the Shanghai Containerized Freight Index (SCFI) increase of 30.7% during the same period. SCFI is an index created to reflect the spot freight rates of 15 shipping routes in the Shanghai export container transportation market.
Freight rates on the U.S. West Coast route have continued to rise since the Geneva agreement in which the United States and China agreed to lower mutual tariffs. As of the 30th of last month, the freight rate for that route has increased by 120.4% compared to the 9th of last month, prior to the Geneva agreement. During the same period, the SCFI rose by 54.1%.
This increase in freight rates continues despite an increase in the supply of ships for the route. Global shipping analysis firm Sea-Intelligence estimates that the total shipping capacity on the Asia-North America West Coast route will increase by 18% in June and July this year compared to the same period last year. The shipping capacity for that route in June and July of last year was 1,063,015 TEU.
Despite the increase in supply, the rising freight rates have also led to an upward revision of HMM's performance outlook, which has a high proportion of revenue from the U.S. route. In the first quarter of this year, HMM generated 38.5% of its container business revenue of 2.4658 trillion won from the U.S. route.
Korea Investment & Securities projected that HMM's annual operating profit for this year would amount to 1.547 trillion won, down 56% from the previous year, but recently revised it to 1.88 trillion won. Mirae Asset Securities also expected HMM's operating profit this year to be 2.196 trillion won in March, but recently raised its forecast to 2.504 trillion won.
However, observations have been raised that this trend may not continue. It is believed that when the tariff suspension between the U.S. and China ends, cargo demand will decrease, leading to a significant possibility of a drop in freight rates.
Kang Seong-jin, a researcher at KB Securities, noted, "It is difficult to expect a recovery of the free trade trend, and the current increase in freight rates may not reflect a meaningful upward trend as the supply of container ships is growing faster than demand."