Keith Wallis, Special CorrespondentNov 21, 2022 2:44PM EST
source : JOC.com (The Journal of Commerce)
Keith Wallis, Special Correspondent
Nov 21, 2022 2:44PM EST
source : JOC.com (The Journal of Commerce)
South Korea is creating its own container freight index in a bid to better reflect rates from Busan (above) to major export markets, including the US and Europe. Photo credit: Panwasin Seemala/Shutterstock.com. The South Korean government will establish a $2.2 billion fund to help support the country's container lines amid the downturn in shipping markets.
Details were revealed last week at a meeting between 10 shipping companies, including HMM and Heung-A Shipping, and officials at South Korea’s Ministry of Maritime Affairs and Fisheries.
"The government will do its best to maintain the international competitiveness of our shipping companies no matter what difficult circumstances arise through measures to strengthen competitiveness...," Maritime Affairs and Fisheries Minister Cho Seung-hwan said following the meeting, according to a statement.
The fund, overseen by the Korea Ocean Business Corporation (KOBC), is one of several measures unveiled to help the country’s shipping sector weather what the maritime affairs ministry sees as an impending downturn. The aim is to prevent another collapse similar to the demise of Hanjin Shipping in 2016-17. KOBC plans to use dividends from its shareholding in HMM to kickstart the fund, which is the latest government initiative to support Korean shipping companies and shippers.
Cho said South Korean shipping companies were generally loss-making between 2016 and 2020 and only returned to profit in 2021. He said freight rates have already fallen by 67 percent this year and carriers’ cash reserves “will inevitably decrease as freight rates fall.” Expect rates to fall for ‘foreseeable future’ The ministry estimated fleet growth will be 8.1 percent next year, while cargo volumes will increase by just 2.5 percent. And a lack of demand in North America and Europe meant “container rates are expected to decline for the foreseeable future,” Cho said.
"We cannot conclude that the current situation is a crisis, but we plan to prepare for the coming crisis through pre-emptive policy formulation and further support for the shipping industry to firmly support Korea's import and export logistics," he said.
As a first step, the Korea Maritime Promotion Corporation (KMPC) Friday invited small and medium-sized shipping companies facing liquidity issues to apply for financial support. The KMPC has allocated a total of $220 million of the larger fund to help smaller carriers.
The KMPC comes under the control of the KOBC. Both were created in 2018 to support Korean shipping companies and shippers following Hanjin’s collapse.
The KOBC’s fund will be used to support corporate restructuring and mergers and acquisitions, while KMPC will acquire up to 50 ships by 2026 that will be chartered to South Korean carriers.
KOBC has also set up a Korea container freight index, using rates from 13 trade lanes, to replace the Shanghai Containerized Freight Index in a bid to better reflect container rates from Busan to major export markets, including the US and Europe.
Details were revealed last week at a meeting between 10 shipping companies, including HMM and Heung-A Shipping, and officials at South Korea’s Ministry of Maritime Affairs and Fisheries.
"The government will do its best to maintain the international competitiveness of our shipping companies no matter what difficult circumstances arise through measures to strengthen competitiveness...," Maritime Affairs and Fisheries Minister Cho Seung-hwan said following the meeting, according to a statement.
The fund, overseen by the Korea Ocean Business Corporation (KOBC), is one of several measures unveiled to help the country’s shipping sector weather what the maritime affairs ministry sees as an impending downturn. The aim is to prevent another collapse similar to the demise of Hanjin Shipping in 2016-17. KOBC plans to use dividends from its shareholding in HMM to kickstart the fund, which is the latest government initiative to support Korean shipping companies and shippers.
Cho said South Korean shipping companies were generally loss-making between 2016 and 2020 and only returned to profit in 2021. He said freight rates have already fallen by 67 percent this year and carriers’ cash reserves “will inevitably decrease as freight rates fall.” Expect rates to fall for ‘foreseeable future’ The ministry estimated fleet growth will be 8.1 percent next year, while cargo volumes will increase by just 2.5 percent. And a lack of demand in North America and Europe meant “container rates are expected to decline for the foreseeable future,” Cho said.
"We cannot conclude that the current situation is a crisis, but we plan to prepare for the coming crisis through pre-emptive policy formulation and further support for the shipping industry to firmly support Korea's import and export logistics," he said.
As a first step, the Korea Maritime Promotion Corporation (KMPC) Friday invited small and medium-sized shipping companies facing liquidity issues to apply for financial support. The KMPC has allocated a total of $220 million of the larger fund to help smaller carriers.
The KMPC comes under the control of the KOBC. Both were created in 2018 to support Korean shipping companies and shippers following Hanjin’s collapse.
The KOBC’s fund will be used to support corporate restructuring and mergers and acquisitions, while KMPC will acquire up to 50 ships by 2026 that will be chartered to South Korean carriers.
KOBC has also set up a Korea container freight index, using rates from 13 trade lanes, to replace the Shanghai Containerized Freight Index in a bid to better reflect container rates from Busan to major export markets, including the US and Europe.
· Contact Keith Wallis a keithwallis@hotmail.com