Another set of unsurprising results from a major shipping company. Hapag Lloyd released its full-year numbers on the 10th March describing an 80% year-on-year rise in revenue to US$26.8bn and a ten-fold increase in Group profit from $1bn in 2020 to $10.7bn in 2021. Again, unsurprisingly, the Hamburg-based line commented that “the main drivers of these positive business developments have been significantly improved freight rates resulting from very strong demand for goods exported from Asia.” The picture of container volume through-put increasing by a mere 0.3% yet container freight rates leaping by 80% to an average of over $2,000 is also familiar.
Looking at the breakdown of costs for the year, it is interesting to see that ‘Handling and Haulage’ rates went up by 18% and ‘Equipment and Repositioning’ rose by 11%. Fleet depreciation costs also went up by around 9% due to more expensive charters. Hapag Lloyd’s net debt is now nil and liquidity is $8.7bn.
Hapag Lloyd sees the prospects for the container shipping market will “be very strong in the first half of 2022” although “it anticipates that the strained situation in the global supply chains will ease in the second half of the year, which should lead to a beginning normalisation of earnings”. Looking at the data published alongside the results, it can be seen that the world’s container ship fleet is growing. Orders placed with ship-yards represent 22% of the existing fleet, with Q1 seeing a particular boom in orders. Presumably, this will drive down freight rates, although it will only ameliorate the imbalance of cargo flow which is at the core of the congestion which in turn is driving up freight rates.
Whilst it is surely unlikely that Hapag Lloyd will see profits rising tenfold, as Hapag Lloyd’s CEO, Rolf Habben Jansen admits, there is also no reason to think profits will collapse. If Hapag Lloyd is right the pick-up in container volumes will balance out the growth in fleet size, at least in the short-to-medium term. One threat to this profits picture, however, might be other transport costs such as road haulage.
Source: Transport Intelligence, 17th March 2022
Author: Thomas Cullen