Hanjin head predicts end to transpacific losses

Hanjin Shipping Co, South Korea's largest container line, expects a return to profit on its biggest routes as an economic recovery in the US revives demand for Asian-made goods.

"The bleeding will stop as of May," chief executive officer Kim Young Min told Bloomberg. "We were losing so much money on transpacific trade."

Hanjin has secured close to 90 percent of its target for rates increases in new annual contracts and the company now plans to introduce peak-season surcharges about four weeks earlier than usual as demand rebounds.

Industrywide traffic on transpacific routes may rise 10 percent this year and even more quickly on Asia-Europe lanes, provided the European debt crisis doesn't spread to major economies such as Spain, Kim said.

"Advance bookings are still high, which could mean we are seeing actual demand rising rather than just restocking," said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul.

"Rebounding US consumer spending is an encouraging sign."

Hanjin's vessels are about full on all routes, which is prompting the Seoul-based shipping line to consider expanding its fleet by more than a planned six percent, Kim said. The company's overall cargo volume increased 26 percent in the first four months, he said.

Hanjin has signed about 90 percent of its annual transpacific contracts, Kim said. The company, along with A.P. Moeller-Maersk A/S, China Cosco Holdings Co. and the 12 other members of the Transpacific Stabilisation Agreement agreed to seek an increase of US$800 per 40-foot container in the talks after price wars contributed to losses last year. Kim is the current chairman of the group.

Hanjin, which carries about half its traffic across the Pacific, may levy a $400 per 40-foot container peak surcharge on transpacific cargos next month, Kim said.

Mediterranean Shipping Co plans to levy a $500 peak-season surcharge next month on shipments traveling to the US west coast from Asia, according to its website.

The rate increases may help Hanjin make an operating profit at its container business from the current quarter, Kim said. The business generated an operating loss of $8 million in the first quarter.

Hanjin may post a net income in the third quarter, excluding the impact of exchange fluctuations on some costs, Kim said, without elaborating.

To boost its finances, Hanjin Shipping is seeking to raise 254 billion won ($205 million) by selling 10.9 million new shares. The company has no plans for further offerings, Kim said.

The company has also agreed to sell a 49 percent stake in a port terminal unit in Busan, South Korea's busiest port, to a group of local financial investors, Kim said. The 200 billion won deal will likely close next month, he said, without elaborating.

Shipping demand still remains below 2008 levels, and the European crisis may undermine the rebound, Kim said.

Container lines have been adding capacity on Asia-Europe routes after a pick-up in demand allowed them to return to profit on the sector as early as at the end of 2009.

"The impact of Greece and Portugal has been relatively small, but what we're looking at carefully is what is going to happen in Spain," he said. "Spain is a major market in the Mediterranean as well as in Europe."

Greece's public finances began rattling investors late last year, when the country more than tripled its budget deficit forecast for 2009 to 12.7 percent of gross domestic product. The shortfall prompted European Monetary Affairs Commissioner Joaquin Almunia to say Greece's finances had become a "concern for the whole euro area".

"European woes have caused worries about another round of crisis although that that hasn't yet shown in cargo traffic," he said.

(Source:www.cargonewsasia.com)