Hapag-Lloyd reports ‘significantly higher’ Q1 profit

CEO Rolf Habben Jansen said transpacific contract rates saw an average “three-digit increase” per TEU.

Hapag-Lloyd reports ‘significantly higher’ Q1 profit

CEO Rolf Habben Jansen said transpacific contract rates saw an average “three-digit increase” per TEU.

Hapag-Lloyd reports ‘significantly higher’ Q1 profit

CEO Rolf Habben Jansen said transpacific contract rates saw an average “three-digit increase” per TEU.

 

   Hapag-Lloyd said it had a profit of $109 million in the first quarter of 2019 compared with a $42 million loss in the same period last year. Earnings before interest and taxes were up 292% to $243 million and earnings before interest, taxes, depreciation and amortization were up 109% to $556 million.
    Revenue, transport volumes and freight rates all increased.
    In the first quarter of this year Hapag-Lloyd had revenue of $3.48 billion compared with $3.22 billion in the same period last year.
    The Hamburg-based carrier carried 2,929,000 TEUs in the first quarter of 2019, 68,000 or about 2.3% more than in the first quarter of 2018.

   The freight rate for those containers also was up nearly 4.9%. averaging $1,079 per TEU in the first quarter of 2019, $50 more than than in the first quarter of 2018.
    Rolf Habben Jansen, the company’s chief executive officer, said contract rates in the transpacific were up by a “three-digit number per TEU” over last year and that rates on the Asia-Europe trade lane were up between $50 and $100 per TEU.
    Bunker fuel cost in the first quarter of 2019 averaged $425 per metric tonne — that’s 14% higher than the average a year earlier.
    “Thanks to higher transport volumes, better freight rates and a stronger U.S. dollar, we achieved a good result and got the year off to a very decent start,” said Habben Jansen.
    Talking about the general outlook for container shipping, he said despite downgrades in GDP forecasts, container demand is still intact. Growth in container carrying capacity is slowing, which he said should lead to a tightening in the supply-demand balance in the industry.
   He said there was good acceptance by shippers of new bunker formulas shipping lines are designing to take into account the expected spike in fuel costs because of the requirement by the International Maritime Organization that ships not equipped with scrubbers use low-sulfur fuel at the start of 2020.
    Hapag-Lloyd plans to deal mostly with that requirement by using low-sulfur fuel, although it is installing scrubbers on 10 ships. It also is planning to convert one ship to run on liquefied natural gas in the first quarter of 2020.
    As companies take ships out of service to have scrubbers installed, that should have some effect on tightening ship supply, but Habben Jansen said only a very small percentage of the global fleet is going to have scrubbers.
    He said scrubber-equipped ships are likely to be deployed on a variety of services and not concentrated on, for example, the Asia-Europe trade lane.
    While the effect of the IMO 2020 mandate will depend on the spread between current high-sulfur bunker fuel and low-sulfur fuel, he said the extra costs will be $80 to $100 per TEU.
   He also didn’t believe there is likely to be a lot more slow steaming by container carriers, though he said there is some political pressure for slower ships. He said there is not a lot of surplus ships that could be used for slow steaming.
    Global transport volumes by all carriers in the first quarter have been relatively flat, the company said. Hapag-Lloyd saw growth in the Asia-Europe, transatlantic, South American and African trades, which helped offset declines in the transpacific and intra-Asia trades.
    Spot container freight rates in the first quarter, as measured by the Shanghai Containerized Freight Index, have been higher for most of 2019 and in 2018. Though they have dropped since the beginning of the year, Habben Jansen believes it is likely they will begin to increase in the second and third quarters as they did last year, though he added there is “always an element of uncertainty.”
    He said the orderbook for new ships represents about 11% of the global container fleet and that scrapping of ships is expected to be higher this year than in 2018, all of which bodes well for an improving supply-demand situation.
    Talking about goals for the coming year, Habben Jansen said the company will strive to increase profitability, deleverage the company, continue to prepare for the IMO 2020 low-sulfur fuel mandate, improve the quality of its services and develop more “digitalized solutions.”
    Habben Jansen said that about 7% of the company’s overall business is now being conducted on its Quick Quotes platform that can be used to get prices and submit bookings. He said the company plans to come out with initiatives to boost use in the coming year.

However, if shipping alliances are outlawed altogether, then freight rates will skyrocket because alliances are the only way that carriers can operate ultra-large container ships (ULCVs) effectively.

Iron ore shipments from U.S. Great Lakes ports totaled 6 million tons in May, up 2% year-over-year, according to the Lake Carriers’ Association.

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Hapag-Lloyd reports ‘significantly higher’ Q1 profit

CEO Rolf Habben Jansen said transpacific contract rates saw an average “three-digit increase” per TEU.

May 09, 2019 on Dec 27, 2018AmericanShipper.com

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Hapag-Lloyd reports ‘significantly higher’ Q1 profit

CEO Rolf Habben Jansen said transpacific contract rates saw an average “three-digit increase” per TEU.

May 09, 2019 on Dec 27, 2018AmericanShipper.com