Hapag-Lloyd AG updates
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One of the world’s largest shipping companies has reported first-half profits far in excess of those made over the past decade as a whole, illuminating how disruption to global supply chains is powering bumper profits for carriers.
Hapag-Lloyd’s net profit for the six months to June jumped tenfold over the previous year to €2.7bn as freight rates surged due to rampant demand for goods, bottlenecks at ports and a shortage of empty containers. That compares to a total net profit of €977m in the previous 10 years.
“What we’ve seen in 2021, I don’t know if we’ll ever see that again,” chief executive Rolf Habben Jansen told the Financial Times.
The pandemic has caused large ructions in supply chains and shipping due to volatile demand as a result of lockdowns and booming ecommerce. Containers have been in short supply and vessels have been tied up waiting to berth at overwhelmed ports, leading shipping costs to rocket since the end of last year.
Hapag-Lloyd’s average freight cost per 20ft container rose 46 per cent to $1,612 in the first six months of the year.
It is the latest major container shipping group to report bumper first-half earnings and flag an upbeat outlook on the back of supply chain disruptions, with the sector having endured a difficult decade of minimal profitability before the pandemic struck. Danish rival Maersk raised its annual profit forecast last week as it reported a stellar set of second-quarter results.
The closure of one terminal this week at Ningbo in China, the world’s third busiest port, after one dock worker tested positive for Covid-19 could become the latest disturbance to threaten a return to normal for global logistics.
Habben Jansen warned that the “first week would be decisive” in Ningbo and added that there would be no quick fix to the equipment shortages and delays.
“Looking at the market environment today, we however do not believe that the situation will return to normal any time soon,” he said. “We currently expect the market situation only to ease in the first quarter of 2022 at the earliest.”
With cargo prices set to stay high, the German group reaffirmed expectations that its annual earnings before interest and tax would fall in a range of $7.5bn to $9.5bn, a figure which would again easily outstrip the combined results of the past 10 years.
Hapag-Lloyd used the first-half profits to reduce its net debt by $1.5bn and to significantly lift its dividend.
The majority of its business is on contracts with fixed, long-term rates but costs for shippers securing slots at shorter notice on the market have soared to astronomical levels, increasing tenfold on the Asia to North America route to above $20,000 per 40ft container.
“The relationship between spot and contract rates is too out of whack,” said Habben Jansen.