SOUTH Korea’s shipping companies have decided to operate more ships to help exporters suffering from a shortage of cargo ships.
According to industry sources, HMM has begun to run a 4,600 TEU vessel on American routes. The ship departed Busan Port for Los Angeles last week.
HMM also plans to operate two more container vessels this month. SM Lines will begin services of a 3,000 TEU vessel on the same route while Korea Maritime Transport Co (KMTC) is seeking to run a 2,800 TEU ship on routes to and from Indonesia in December, reports Korea Times.
The shipping firms’ moves will likely help ease a setback facing the nation’s major exporters, but still falls short of satisfying their soaring demand for shipping in the year-end season. The recent recovery in global business activities has boosted demand for shipping services, though they had remained sluggish amid the resurgent Covid-19 pandemic.
Exporters have been facing a steady rise in cargo costs as well as a shortage in shipping. The Shanghai Containerized Freight Index (SCFI) which shows the level of current sea-route freight rate recently hit a record high of 2,048. This is the first time for the index to surpass the 2,000 level since October 2009 when the tallying began.
In addition to the shortage of the vessels, exporters have been undergoing hardship due to the continued depreciation of the US dollar against the Korean won, which has worsened their profitability.
Korean exporters’ difficulties aggravated as shipping services began to skip Busan Port and directly connect Chinese ports to the US. Previously, vessels from China used to drop by Busan to carry Korean products, but recently they are full of Chinese cargo and so don’t have to visit Busan. This means domestic exporters have been facing difficulties in securing vessels to carry their products.
In fact, the entire shipping volume by domestic shipping companies reached 780,000 TEU in October, accounting for only 74 per cent registered in 2016 before Hanjin Shipping went bust. Before 2016, domestic shipping firms shared 12 per cent of the Asian and American routes, which had dwindled to only 7 per cent in June this year.
South Korea heavily relies on exports for economic growth. A delay in shipping products could deal a severe blow to exporters and furthermore to the economy.