ID :
108307
Wed, 02/24/2010 - 08:33
Auther :

(News Focus) Smooth sailing ahead for S. Korean shippers this year

By Park Sang-soo
SEOUL, Feb. 24 (Yonhap) -- South Korean shipping lines that were hit by a severe
economic slump last year are set to see their businesses improve this year as the
global economy is on a recovery track that is helping to raise shipping demand,
analysts say.
The rosy outlook comes amid speculation that the shipping industry might have
already hit bottom and is now poised to rebound from the recent downswing, as a
key barometer of commodity shipping rates continued to climb.
The Baltic Dry Index (BDI), a measure of shipping costs for commodities, posted
its first weekly advance in five weeks last week on speculation that demand may
recover, rising 0.4 percent to 2,714 on Feb. 19.
"Market consensus is that the sector hit bottom," said Um Kyung-ah, an analyst at
Shinyoung Securities. "Freight rates will continue to rise through the first half
of the year, which will help local shippers recover from the downturn."
Um of Shinyoung Securities forecast the BDI may range from 3,000 to 3,500 this year.
The index hit a record of 11,793 on May 20, 2008 before plunging to as low as 663
on Dec. 5 as the global economic downturn reduced shipping demand.
The index, however, bounced back, topping the 4,500-mark in November last year
and averaging 3,401 over the past quarter, almost triple the level seen a year
earlier, as Chinese demand for raw materials rebounded from a slump caused by the
global recession and ensuing credit crunch.
South Korea's four shipping lines, led by Hanjin Shipping Co., suffered a massive
loss of over 2.8 trillion won (US$2.42 billion) last year as demand dropped and
freight rates plunged.
Hanjin Shipping, the country's No.1 shipper, logged a loss of 1.4 trillion won
last year. Hyundai Merchant Marine Co., the No.2 player, also suffered a loss of
806 billion won.
"Freight rates and demand are rising at a faster than expected pace," said Ji
Hyun-seok, an analyst at NH Investment & Securities. "I think the worst case
scenario is behind them."
Shipping lines are also forecasting that this year's business performance will be
better than the past year as the economic recovery boosts shipping demand.
Hanjin Shipping is targeting sales of $7.2 billion this year, compared with last
year's $5.6 billion. The shipper also expects to see an operating profit,
compared with an operating loss of $26 million last year.
Hyundai Merchant Marine also expects a 17 percent rise in sales, reaching 7.14
trillion won this year, and an operating income of 336 billion won, compared with
an operating loss of 560 billion won last year.
"Shipping rates have increased and are expected to further rise," said an
official at Hanjin Shipping. "Trade volume has risen since December and we are
expecting to raise rates for the trans-Pacific trade when the new contract year
starts in May," he said.
STX Pan Ocean Co., the nation's largest bulk-shipping line, and Korea Line Corp.
are widely expected to turn around this year.
Bulk carriers, which suffered huge losses last year, are typically the most
vulnerable to shifts in the global shipping industry as they are heavily
dependent on the economic cycle.
"As trade volume increases, bulk carriers will benefit the most," said Yang
Ji-hwan, an analyst at Daishin Securities. "STX Pan Ocean may see a faster than
expected recovery in its fundamentals."
Yang said STX Pan Ocean's turnaround has been much faster than anticipated, and
both the container and bulk divisions are likely to post positive operating
results this month.
STX Pan Ocean swung to the black in the fourth quarter of last year from the
previous quarter on rising demand and reduced costs.
The shipper posted a profit of 55 billion won in the October-December period on
sales of 1.96 trillion won. It also logged an operating income of 24 billion won.
Some analysts, however, warn that it is still too early to say whether the
industry is set to recover.
"The rising BDI is very positive, but the global economic slump is still
underway, which means shipping lines may face lingering uncertainties," said Song
Jae-hak, an analyst at Woori Investment & Securities.
Song Bong-yong, an executive director at Samsung Logix Corp., the country's
seventh-largest shipper, also said the industry is on a recovery path, but may
still face ups and downs in the months ahead.
"It is hard to say the sector is on a full-fledged recovery track," he said. "But
this year's business environment should be better than last year."
sam@yna.co.kr
(END)

X