The overseas earnings of major South Korean logistics firms surged in the third quarter, buoyed by higher sea freight rates that bolstered operating profits in their forwarding businesses. Forwarding refers to managing logistics processes to ensure goods are transported to their final destinations. To secure new growth engines, these companies are intensifying investments in overseas subsidiaries.
According to industry data released on Nov. 28, CJ Logistics reported a cumulative operating profit of 58.3 billion won (approximately $42 million) from its global business segment in the third quarter, a 27.4% increase from the same period last year. Revenue from the segment rose 4.4% year-on-year to 3.2986 trillion won ($23.6 billion).
Hanjin Logistics saw a remarkable 303% year-over-year increase in cumulative operating profit from its global business segment, reaching 9.3 billion won ($6.7 million). Its revenue grew 55.6% to 398.6 billion won ($285.75 million). Conversely, Lotte Global Logistics experienced a 24.1% drop in cumulative global segment revenue to 233.8 billion won ($167.58 million), though its operating profit climbed 38.5% to 6.2 billion won ($4.5 million).
Industry experts attributed the improved performance to two key factors: a base effect stemming from last year’s subdued export-import activity and this year’s significant rise in sea freight rates. In 2022, South Korea’s exports totaled $632.2 billion (880.78 trillion won), down 7.5% year-over-year, while imports fell 12.1% to $642.6 billion. From January to October 2023, exports rose 9% to $565.7 billion (747.77 trillion won), with imports down 2.1% to $537.4 billion.
Sea freight rates, a pivotal determinant of forwarding profitability, have climbed sharply. The Shanghai Containerized Freight Index (SCFI), which averaged 1,005.8 points in 2022, soared to 1,896.7 points at the beginning of 2024, peaking at 3,733.8 in July. As of Nov. 22, the index stood at 2,160.1—more than double its level in November 2023.
Facing saturation in the domestic market, South Korean delivery companies are shifting their focus to international expansion. CJ Logistics, in partnership with Korea Ocean Business Corporation, is spearheading a 600 billion won ($429 million) project to establish logistics centers in North America. The company is building a cold chain logistics center in Kansas, slated to open in the third quarter of 2024, and launched another cold chain facility in Gainesville, Georgia, on Nov. 14.
Hanjin Logistics expanded its Los Angeles fulfillment center by 50% in June and plans to increase the capacity of its New Jersey warehouse by over 50%. Additionally, it is setting up a subsidiary in Mexico by the end of the year to provide forwarding and integrated trucking services, enhancing synergies in the North American market. Meanwhile, Lotte Global Logistics, in collaboration with Korea Ocean Business Corporation, is investing up to 500 billion won ($358.34 million) to develop logistics centers in Vietnam. These centers will include facilities with ambient and cold storage capabilities.
