SEOUL, March 10 (AJP) - Global cargo freight rates are tumbling as U.S. tariff policies dampen trade flows, prompting South Korean shipping and aviation companies to recalibrate their business strategies.
The Shanghai Container Freight Index (SCFI), a key barometer of shipping costs, fell to 1,436.3 on March 7, a decline of 42.7 percent since the start of the year and 61.5 percent from its peak in July 2024, according to the Shanghai Shipping Exchange. The index, which tracks freight rates across 15 major routes, has now reached its lowest level in 14 months.
The downturn extends beyond maritime shipping. Air cargo rates have followed a similar path, with the Baltic Air Index dropping 21.8 percent to 2,034.0 since December, according to data from Hong Kong’s TAC Index.
Analysts largely attribute the slump to trade policies enacted by the United States, particularly the additional 10 percent tariff on Chinese imports imposed on March 4, following an initial round in February.
“It is difficult to predict whether freight rates will continue to decline or rebound, creating uncertainty for businesses,” said an official from the Korea International Trade Association. “The trajectory of freight rates will depend on factors such as U.S. port fees on Chinese vessels, the final tariff structures, and the timeline of their implementation.”
The repercussions are reverberating through South Korea’s logistics sector.
Korean Air, which generated 4.4 trillion won ($3.3 billion) in cargo revenue last year — accounting for a quarter of its 16 trillion won in total revenue — faces mounting challenges.
A company spokesperson said Korean Air is seeking to “diversify its portfolio by developing new export destinations with shippers.” Similarly, Asiana Airlines plans to trim cargo routes in regions experiencing declining volumes while adjusting cargo pricing strategies in select markets.
HMM, South Korea’s largest container shipping company, is also pivoting. With 85 percent of its revenue tied to container ships, the company is ramping up its bulk carrier fleet, aiming to expand from 36 to 110 vessels by 2030.
It has also announced plans to acquire SK Shipping’s bulk carrier division, a move that could bolster its position in the more stable bulk shipping market, which relies on long-term contracts for raw materials transport.
While the falling freight rates offer some relief to South Korean exporters — who last year struggled with soaring logistics costs — the broader implications are less reassuring.
Samsung Electronics spent 2.15 trillion won on logistics in the first three quarters of 2024, nearly one trillion won more than in the same period the previous year. LG Electronics, meanwhile, cited logistics expenses as a major factor in its fourth-quarter operating profit plummeting by half compared to the previous year.
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