SHIPPING companies anticipate strong financial results even amid falling freight costs and a stronger dollar in South Korea.
The shipping industry is expected to report solid profits despite deteriorating market conditions due to the rise in the won-dollar exchange rate.
While many anticipated that profitability would decline due to oversupply as ships ordered during the Covid-19 pandemic are being delivered, it is believed that some losses can be offset by foreign exchange gains.
According to the shipping industry on the 24th, the Shanghai Containerized Freight Index (SCFI), which reflects spot freight rates on 15 shipping routes in the Shanghai export container transport market, recorded 2,390.17 on the 20th. This is a decrease of 36 per cent compared to the mid-year peak of 3,733.80 in early July.
In January 2022, during the height of the Covid-19 pandemic, it hit 5,109.60.
The reason for the declining freight rates is that new ships ordered during the Covid-19 pandemic are being gradually introduced into the market, increasing supply.
The delivery volume of container ships has fluctuated around 1 million TEU annually from 2020 to 2022, but it reached 2.3 million TEU last year and is expected to exceed 3 million TEU this year.
According to Clarkson Research, a British maritime analysis firm, the annual delivery volume of container ships is projected to average 1.6 million TEU over the next three years, according to South Korea's ChosunBiz.
Despite the declining cycle in the shipping industry, if the strong dollar (weak won) persists, the performance of shipping corporations is expected to remain robust. This is because the functional currency of the shipping industry is the dollar.
HMM, the largest shipping company in South Korea, recorded a foreign exchange profit and loss of KRW2.08 trillion (US$1.41 billion) in the third quarter of 2022, when the won-dollar exchange rate averaged KRW1,391. In the first quarter of 2009, when the average won-dollar exchange rate was KRW1,432 due to the aftermath of the financial crisis, HMM recorded a foreign exchange profit and loss of KRW1.02 trillion.
A researcher from Korea Investment & Securities noted: 'The strong dollar trend is positive for the performance of shipping corporations whose functional currency is the dollar.'
One industry official said: 'While the increase in the exchange rate will boost book profits, it is expected that avoiding the downturn cycle caused by oversupply will be difficult.'
SeaNews Turkey
The shipping industry is expected to report solid profits despite deteriorating market conditions due to the rise in the won-dollar exchange rate.
While many anticipated that profitability would decline due to oversupply as ships ordered during the Covid-19 pandemic are being delivered, it is believed that some losses can be offset by foreign exchange gains.
According to the shipping industry on the 24th, the Shanghai Containerized Freight Index (SCFI), which reflects spot freight rates on 15 shipping routes in the Shanghai export container transport market, recorded 2,390.17 on the 20th. This is a decrease of 36 per cent compared to the mid-year peak of 3,733.80 in early July.
In January 2022, during the height of the Covid-19 pandemic, it hit 5,109.60.
The reason for the declining freight rates is that new ships ordered during the Covid-19 pandemic are being gradually introduced into the market, increasing supply.
The delivery volume of container ships has fluctuated around 1 million TEU annually from 2020 to 2022, but it reached 2.3 million TEU last year and is expected to exceed 3 million TEU this year.
According to Clarkson Research, a British maritime analysis firm, the annual delivery volume of container ships is projected to average 1.6 million TEU over the next three years, according to South Korea's ChosunBiz.
Despite the declining cycle in the shipping industry, if the strong dollar (weak won) persists, the performance of shipping corporations is expected to remain robust. This is because the functional currency of the shipping industry is the dollar.
HMM, the largest shipping company in South Korea, recorded a foreign exchange profit and loss of KRW2.08 trillion (US$1.41 billion) in the third quarter of 2022, when the won-dollar exchange rate averaged KRW1,391. In the first quarter of 2009, when the average won-dollar exchange rate was KRW1,432 due to the aftermath of the financial crisis, HMM recorded a foreign exchange profit and loss of KRW1.02 trillion.
A researcher from Korea Investment & Securities noted: 'The strong dollar trend is positive for the performance of shipping corporations whose functional currency is the dollar.'
One industry official said: 'While the increase in the exchange rate will boost book profits, it is expected that avoiding the downturn cycle caused by oversupply will be difficult.'
SeaNews Turkey
