By Arthur Chen photo: Pexels

After 18 hours of long-night negotiations between labors and management, at 8 am on September 2nd, the HMM line’s management signed the 2021 Wage Group Agreement with representatives of the HMM Land Trade Union and the HMM Sea crew Union. According to the agreement, HMM staff's salary will be increased by 7.9%, along with an incentive payment equivalent to 650% of the monthly basic salary will be paid. As a result, the worry about the possible strike of HMM, which may cause chaos in international logistics and sea freight import and export, have alleviated. The employers, labor unions, government, export companies and other relevant parties finally relief the pressure. According to industry insiders in South Korea, HMM's labor and management negotiations on the 2021 wage group agreement began at the earliest on June 18, after 77 days, and finally ended on September 2.

A person from HMM said: "Due to the prolonged labor-management negotiations during this period of time, the people have been worried that a little carelessness will cause the shipping chaos in South Korea. For this, we deeply apologize. Considering the pandemic has created difficult conditions and the impact of the shipping industry on the national economy, labor and management eventually made concessions and reached an agreement."

Most of the guests who may not know the possible strike crisis of the HMM might cause serious squeezing the spaces of the other 3 shipping lines (ONE, YML, HPL) belong to “THE Alliance”, and subsequent chaos in shipping schedules, which may result in more higher ocean freight rate. Further side effects such as short of container, short of space, port skipping and delays in shipping schedules. Therefore, in the previous articles, it was described as the "black swan incident". In fact, many customers and freight forwarders which have confirmed space by ONE, YML, and HPL but forced to cancel their bookings at week#35. This was to prevent the potential delay by the HMM strike from being stuck in the port of Busan. Fortunately, HMM's strike crisis was resolved peacefully. There are not many things that can be worth a smile in supply chain logistics in 2021. The ending of this event is one of the few events worthy of happiness.

As we all know, the total revenue of the world's nine largest shipping lines in the first half of this year has exceeded 100 billion U.S. dollars. Among them, the total net profit exceeded than last year, reaching 29.02 billion U.S. dollars, compared with 15.1 billion U.S. dollars last year. The biggest cause of this result is the soaring ocean freight. It is not unusual for a shipment to be shipped to the United States in a 40-foot container with freight rate of 20,000 US dollars. Low value seasonal goods, by a container value in between 10,000 and 20,000 US dollars. The sky-high ocean freight rate have forced some importers in holding to place orders. Shipping consulting agency Sea-Intelligence also predicts that this year's soaring container freight rates may on going until next spring, and the high demand for container ships and equipment will also continue. The U.S. trade freight rates have the opportunity to rise by another 25%.

In addition, on the export side, the ocean freight rate in “high fever”, and trading companies in China are also calling for help !  Beside unable to get spaces and available containers, they are facing more tough issue at the rising shipping cost. Over US$20,000 a container shipping cost has created a dilemma for many trading companies. The rising shipping cost are constantly eroding corporate profits. However, as an export-oriented enterprise, if it wants to maintain its market share, it can only sacrifice profits. Basically, ocean freight cost has diluted 30% to 50% of the company's profits. Small and medium-sized enterprises have suffered the most, especially some export companies that produce low-value goods. The ocean freight rate even exceeds the value of the product. Some companies lose money but barely maintain their operations, and some knockout from the market. Large companies have strong bargaining power by long-term agreements with shipping lines so as to the impact is relatively smaller. This is a bloody elimination. Companies that can survive in the zero-sum competition at post-pandemic are either super-large ones or strong ones with unique strength.