HMM is expected to achieve record earnings in the third quarter of this year, driven by strong shipping rates amid the prolonged conflict in the Middle East. However, the business environment is becoming increasingly complex. While calls for HMM to contribute to the Busan community are growing alongside its improved performance, specific support measures to facilitate the company's relocation remain slow to materialize.
According to industry sources on September 13, HMM's operating profit for the third quarter is projected to reach 720.4 billion won, a 142.7% increase compared to the same period last year. The uncertainty surrounding the Red Sea and Suez Canal due to the ongoing conflict has contributed to a rise in the Shanghai Containerized Freight Index (SCFI). HMM also reported a 52% increase in operating profit in the second quarter, thanks to rising shipping rates.
Despite the positive outlook, HMM is not celebrating just yet. As cash reserves grow due to improved performance, there are increasing demands for the company to invest in and contribute to the local community in Busan, especially in light of its planned relocation.
On April 30, HMM decided to move its headquarters from Seoul to Busan following an agreement with labor unions. This relocation is a key part of President Lee Jae-myung's campaign promise to develop Busan as a 'marine capital.' The plan aims to create a symbiotic ecosystem between the shipping and shipbuilding industries and to develop related service sectors such as marine insurance and ship financing, ultimately establishing Busan as a global maritime industry cluster.
Recently, there has been a growing sentiment among lawmakers that HMM's role should extend beyond the shipping and logistics sectors to include local development and sports. Discussions in Busan's political circles have included the necessity for HMM to participate in the North Port dome stadium project, as well as ideas for acquiring or establishing a professional baseball team.
Particularly, the North Port dome stadium project hinges on securing private investment. The acquisition committee led by Busan Mayor Park Je-soo estimates that the cost for a 40,000-seat stadium and related development will exceed 3 trillion won. Even with government support, it is expected that Busan and private entities will need to raise over 2 trillion won. Consequently, there is growing anticipation that HMM, which holds around 12 trillion won in cash assets, should leverage its financial capacity for this investment.
However, the shipping industry warns against viewing HMM's substantial cash reserves as mere surplus funds. The shipping sector is characterized by cyclical booms and busts, making it crucial to prepare for downturns with funds secured during prosperous times.
Current strong performance is largely influenced by rising freight rates due to the Middle East conflict and disruptions along the Red Sea and Suez routes, which could lead to a rapid decline in rates if the situation stabilizes. Additionally, there are concerns about oversupply in the market as global shipping companies continue to introduce large orders of container ships.
Significant investments are also necessary to narrow the gap with global shipping giants. As of July, the world's largest shipping company, MSC, has a container capacity of approximately 7.45 million TEUs, accounting for 21.5% of the global market. In contrast, HMM, ranked eighth globally, has a capacity of about 1.03 million TEUs, just one-seventh of MSC's capacity. This is why industry voices are calling for HMM to prioritize its cash reserves for fleet expansion and strengthening its core competitiveness.
Moreover, the lack of concrete support measures to facilitate HMM's relocation to Busan is concerning. HMM plans to complete construction of its temporary office in Busan by mid-October and begin relocating employees. However, specific plans for tax and financial support from the Ministry of Oceans and Fisheries, as well as employee settlement assistance, remain unclear.
One industry insider remarked, "HMM is becoming a target for various local demands simply because it is making money, creating a situation where it feels like a 'punching bag.' The shipping industry can face downturns at any time, so we must not assume that current cash reserves are sufficient just because the company is performing well."
* This article has been translated by AI.
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