One of Asia’s largest shipping companies is facing the imminent threat of workers’ strikes and may further disrupt global supply chains that are already struggling with soaring costs and shortages of containers and computer chips.
After the crew and dockers voted in favor of the strike last month, South Korea-based HMM will hold talks with the company’s union on Wednesday afternoon to discuss raising wages and demand a substantial pay increase as the group’s profits soar.
Analysts said that the strike could further disrupt the global technology and automotive supply chains, which have caused port bottlenecks due to shortages of materials and parts, as well as coronavirus-related restrictions and personnel shortages.
“If they do strike, it will have a knock-on effect on international shipping,” said Uhm Kyung-ah, an analyst at Shinyung Securities.
HMM’s management proposed an 8% salary increase and a six-month salary bonus, but the union rejected the proposal.
A spokesperson for HMM said that workers “request the company to normalize wages, and the company hopes to gradually increase wages” and acknowledged that wages have not increased in the past eight years.
HMM believes that the possibility of a strike is very low, and management hopes that it can reach an agreement with the union on Wednesday to “avoid sea movement.”
The supply chain is still vulnerable to even minor disruptions. The closure of Chinese ports this year has hit international trade, and the shipping deadlock will continue the turmoil in the supply chain into next year.
HMM estimates that the three-week strike will cause approximately US$580 million in operating losses to the company and other shippers that have formed alliances with it.
The global shortage of raw materials and freight capacity has also led to the weakening of industrial activities in South Korea and some of its trading partners.
Due to the global spread of the highly contagious Delta Coronavirus variants and the slowdown in demand growth for important export products such as semiconductors, the growth of factory activity in South Korea in August slowed for the first time in a year.
According to data from IHS Markit, the country’s seasonally adjusted purchasing managers’ index fell from 53.0 in July to 51.2 in August, or slightly above the 50 mark of expansion and contraction.
Although Korean manufacturers expect the supply chain situation to improve once the pandemic subsides, Asian exporters are racing to secure shipping capacity as logistics groups struggle to deal with the shortage of containers and insufficient berths in ports.
The container shipping group is enjoying unprecedented profits, as the surge in demand for goods prompted an increase in freight rates in the second half of last year.
HMM reports that operating profit in the first half of the year reached a record 2.4 billion won (2.1 billion US dollars), compared with 136.7 billion won in the same period last year. In the same period, its revenue almost doubled to 530 million won.
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Post time: Sep-29-2021