SOUTH Korea's HMM says ocean carriers face a "highly volatile" third quarter amid softening demand, falling spot freight rates, and growing capacity as congestion eases.
The uncertain outlook came as HMM, ranked eighth in the world in terms of capacity, reported a near 17-fold surge in net profit to US$4.6 billion for the first half of the year despite a drop in total liftings.
Total revenue jumped 87 per cent to $7.6 billion year on year, of which container shipping contributed 94 per cent, or $7.2 billion, reports IHS Media.
HMM said liftings dropped 6.2 per cent to 1.8 million TEU in the first half compared with 1.9 million TEU in the same period last year.
The carrier did not give a breakdown of volumes by trade, but in a filing to the South Korea stock exchange said US demand growth "has slowed and freight rates have continued to decline since February due to the easing of port congestion".
Flagging the headwinds facing carriers, HMM said the US market is expected to remain weak in the second half due to the slowdown in the US economy, a decrease in demand for restocking and a contraction in overall consumer sentiment, despite the traditional seasonal peak season.
HMM said it would tackle the market uncertainty by focusing on long-term shipper contracts and increasing the volume of reefer and special cargoes.
Other markets are likely to be mixed in the third quarter, with intra-Asia freight rates affected by the launch of new services and increased vessel capacity, HMM said in the stock exchange filing.
The Middle East and South Asia trade is set to rebound from August due to increased demand, while the South America market will weaken as vessel supply rises, HMM added.
Global bank HSBC in January forecast container shipping profitability will exceed $163 billion this year, while Drewry's industry estimate is for carrier earnings of $200 billion.
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