'Catastrophe' Looms for Container Shipping... HMM Turns to Scaling Up Bulk Business

'Front-loading' Ends, Oversupply Continues
Warnings of a 'Catastrophic' Downturn for the Next Five Years

As warnings mount that the container shipping industry has reached a 'catastrophic' state, HMM, the largest shipping company in South Korea, is turning its attention to bulk carriers. The company is seeking to defend its profitability through a bulk shipping business focused on long-term contracts.

According to the industry on November 25, HMM’s bulk cargo transport volume for the first to third quarters of this year reached 31 million tons, a sharp increase of about 10% compared to 28.16 million tons in the same period last year. During the same period, container shipping volume grew only 3%, from 2.83 million TEU (one TEU is equivalent to one 20-foot container) to 2.93 million TEU.

Bulk carriers are vessels that transport unpackaged cargo as is. In a broad sense, the bulk shipping business includes not only ships carrying raw materials such as minerals or grains, but also oil tankers, LNG carriers, and pure car and truck carriers (PCTC). Unlike container ships, which are highly sensitive to economic cycles, bulk carriers rely heavily on long-term contracts, enabling relatively stable profits even during shipping industry downturns.

HMM headquarters located in Park One Tower, Yeouido, Seoul. Photo by Jo Yongjun

The sharp increase in HMM’s bulk shipping performance is due to deteriorating profitability in the container shipping sector. The Shanghai Containerized Freight Index (SCFI) averaged over 2,000 last year, but shipping rates have continued to decline this year as the effect of 'front-loading exports'-shipping goods before U.S. tariffs take effect-has disappeared amid tariff uncertainties in the second half. Oversupply from the delivery of new vessels has compounded the situation, and some analysts predict a downturn lasting more than five years.

The average annual SCFI this year was 1,598, down 36% from the previous year, and at the end of the third quarter, it hit a yearly low of 1,114.52. Kim Byungjoo, a senior researcher at the Korea Maritime Institute (KMI), projected, "Next year, the SCFI is expected to average between 1,100 and 1,300, which would be a drop of about 18-31% compared to this year."

Yang Jongseo, a senior researcher at the Export-Import Bank of Korea’s Overseas Economic Research Institute, warned, "Unless there is a dramatic boom, the container shipping market could face a severe downturn, so it is necessary to prepare for a serious recession. If the Israel-Palestine conflict is resolved and passage through the Suez Canal becomes unrestricted, the industry could experience a market slump of catastrophic proportions."

HMM is focusing on the bulk shipping business by signing cargo transport contracts and expanding cooperation with cargo shippers (exporters). In May and September this year, the company signed long-term transport contracts worth 636 billion won and 430 billion won, respectively, with Vale, Brazil’s largest mining company. Earlier this month, HMM established a joint venture with BGN Group, the largest LPG shipper in the United Arab Emirates (UAE), to expand its LPG shipping business.

An HMM official stated, "As part of our diversification strategy, we will continue to expand the bulk shipping business alongside our mainstay container segment. We plan to increase our bulk carrier fleet from the current 49 vessels to 110 by 2030."

This content was produced with the assistance of AI translation services.