Hanjin Shipping narrows losses to $99.7m

Hanjin Shipping, South Korea's biggest container carrier by sales, posted a net loss in the first quarter, though narrower than a year earlier, as a substantial rise in bunker-C oil prices cut into profitability, reported Dow Jones Newswires.


"The company also got a heavy blow from a decline in freight rates on European routes and higher operational costs stemming from high oil prices (in the first quarter)," company spokeswoman Sonya Cho said.


Hanjin Shipping's net losses narrowed to US$99.7 million for the three months ended March 31 from $116.99 million a year earlier.
"The loss resulted from a surge in oil prices and an inability to immediately pass on cost hikes to freight rates," said Park Eun-kyung, an analyst at Samsung Securities said. Bunker-C oil prices were up 28 percent year-on year to $600 a metric tonne in the January-March period.


Hanjin will continue to reduce costs to cushion the impact of high oil prices and the oversupply of new vessels in the market, said the statement.


Analysts say the company's earnings will improve because of rising rates for transpacific routes, though the mid-May negotiations on rate hikes for European routes have yet to begin.


"Shippers will eventually accept some, but not all, of the demands from carriers such as fuel surcharges and rate increases," said Joshua Yang, an analyst at Daishin Securities.


Hanjin Shipping, the country's largest shipping company, posted a wider operating loss to $10.69 million in the January-March quarter from $5.9 million a year earlier. Sales rose 14 percent to $2.03 billion from $1.77 billion.


Samsung's Park said freight charges are likely to rise as demand picks up because of the global economic recovery and seasonality, with the recovery in consumption in advanced countries, particularly the US, "benefiting shipping firms such as Hanjin heavily exposed to Asia-US routes".


She forecast shipping companies will seek continued slow steaming and vessel idling without becoming involved in aggressive competition for a bigger share, with new vessel deliveries set to peak in the second quarter.


In February, Hanjin Shipping chief executive Kim Young-min said high oil prices were one of the biggest challenges for the shipping company this year and that its profitability would likely remain slightly below last year's level. In 2010, Hanjin swung to a net profit of $253.73 million from a net loss of $79.69 mllion a year earlier.


Hanjin derives 80 percent of its earnings from the container business and the remaining 20 percent from bulk shipping and other operations.
(Source:http://www.cargonewsasia.com)