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Shipping stocks spike as Israel-Hamas conflict hits Red Sea routes

Published: 20 Dec. 2023, 18:15

SHIN HA-NEE
[email protected]

HMM’s container ship with 4,600 twenty-foot equivalent units [HMM]

With the ongoing attack from Yemen’s Iran-aligned Houthi rebels in the Red Sea forcing global shippers — including Korea’s HMM — to suspend transit through the Suez Canal, rate hikes to freight are driving Korea's shipping stocks higher.

Share price of HMM, the world’s eighth-largest shipper, spiked 20.18 percent on the Kospi on Wednesday to close at 22,150 won ($17).

The steep rally, which began on Monday, was driven by the sharp hike in shipping costs caused by trade route shutdowns in the Red Sea region, as well as the announcement of Harim's impending takeover of the shipping company, which dropped after markets closed on Monday.

Harim Group to acquire HMM for $4.9 billion

Other local shippers also continued to trade strong.

Heung-A Shipping rose 7.97 percent to close at 2,575 won, and KSS Line climbed 6.18 percent to 9,450 won. Korea Line increased 0.70 percent to 2,170 won.

Nine out of the 10 largest shippers in the world, including Switzerland’s MSC and Denmark’s Maersk, halted their Red Sea journeys as Houthi rebels began attacking commercial ships in the region as part of a military campaign in response to the Israel-Hamas conflict.

HMM also said Tuesday that its ships are taking a detour via the Cape of Good Hope in South Africa.

The Korean government, however, says that conflict in the region will likely have limited impact on the country’s export operations.

The Ministry of Trade, Industry and Energy on Wednesday held an emergency meeting chaired by Kim Wan-ki, the ministry’s director-general for international trade affairs.

The trade route shutdown in the Red Sea region, as well as the Panama Canal disruption caused by severe drought, has not directly impacted Korea’s outbound shipments toward Europe or North America, the ministry said.

Overseas production operations run by Korean companies also secured sufficient stock levels of necessary parts and components, and thus were unaffected by shipping disruptions.

The creation of a U.S.-led naval coalition force to protect commercial ships from Houthi attacks was also announced on Tuesday.

BY SHIN HA-NEE [[email protected]]