Rising freight rates help HMM reach a profit of $4.4 billion in 2021

Shipping line HMM reported a net profit of $4.4 billion in 2021, compared with just $100 million in 2020, when sales more than doubled to $11.5 billion.

HMM vessel

Container ship HMM (Photo: HMM)

HMM - Korea's leading carrier - reported a net profit of $4.4 billion in 2021, compared with just $100 million in 2020, as sales more than doubled to $11.5 billion USD in the bull market.

HMM shipping line also returned to profitability in the third quarter of 2020 after 21 consecutive quarters of losses that put HMM on the brink of bankruptcy.

HMM attributed the outstanding profit in 2021 to "higher freight rates", as well as the deployment strategy of deploying mainly scrubber-fitted ships - more than 80% of its vessel capacity has scrubber technology, compared with an industry average of around 30%.

“The price gap between LSFO (low-sulphur fuel oil) and HFO (heavy fuel oil) is expected to widen,” said HMM, adding that it would “be able to respond to rising oil prices effectively”.

Indeed, LSFO oil prices have risen in recent weeks, to around $680/tonne, compared with HFOs' rise to around $510/tonne, with analysts expecting a spread across fuel grades will increase due to rising oil prices, leading to global energy shortages and increased geopolitical tensions.

HMM will save fuel costs from scrubber-equipped ships operating with THE Alliance, as well as its other partners. However, HMM will also have to pay for the higher fuel surcharges due to the agreements to share LSFO tankers operated by other members of THE Alliance.

HMM did not disclose shipping volume for the year, but compared with THE Alliance partners Hapag-Lloyd and ONE, its revenue appears to have grown at a faster rate, suggesting the carrier’s average rate per teu was higher.

However, in Q4 2021, HMM's revenue increased 121% year-on-year, from $1.68 billion to $3.7 billion, on a par with ONE’s increase of 122%, but higher significantly compared to 104% for Hapag-Lloyd. This may indicate that HMM signed more long-term contracts in Q4.

Besides that, other factors are likely, as all carriers that have reported their operations in Q4 2021 so far have reduced output, due to supply chain bottlenecks and lack of open charter vessels to respond to overflowing goods.

HMM deployed more than 40 additional container ships last year, mainly across the trans-Pacific. However, some of these ships have experienced severe docking delays at US West Coast ports.

Since the restructuring with state funding, HMM has increased its capacity to more than 800,000 TEUs and surpassed THE Alliance partner Yang Ming to become the eighth ranked container carrier. In addition, HMM has a new shipbuilding order with a total capacity of 161,000 TEUs. This will bring HMM closer to its ambition to continue its role as a global carrier with a fleet of 1 million TEUs.

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