Certainly, profits increased notably, with EBITDA (Earnings Before Interest, Deprecation and Amortisation) quadrupling, up from $517m in Q1-20 to $1.9bn in Q1-21. Revenue climbed by 33% year-on-year to $4.9bn whilst average freight rates rose by 37.9%, something Hapag-Lloyd ascribed to “continuously high demand and operational disruptions”. The conditions for bunker fuel were also accommodative, with prices falling from $523m in Q1-20 to $384 in Q1-21. The odd thing was that volumes carried fell markedly, with the number of containers carried falling by 2.6% year-on-year to 2.9m.
Hapag-Lloyd expressed frustration at the volumes carried, commenting that “volume development was not fully satisfactory” and that while it had the capacity to carry more cargo “operational challenges such as port congestions, slower turnaround times, equipment shortages…the available transport capacity was reduced”. Of course, it might be pointed out that these problems are the main reason that freight rates are increasing and capacity on the market is so short.
Hapag-Lloyd was optimistic about demand levels in the near future, predicting that container demand growth would be similar to global GDP growth at around 5-6%, although it would slow-moving into 2022. However, Hapag-Lloyd also pointed out that what Rolf Habben Jansen, CEO of Hapag-Lloyd, called “ridiculously low” scrappage rates had to be balanced against only modest new fleet capacity entering the market. That said, the company observed that container utilisation was much less efficient, taking 20% longer for container returns forcing the company to purchase 150,000 TEU’s worth of new containers.
Despite this container issue, the company sees fundamentals for pricing over the next two years as sound and will this result in profits being above “prior-year levels”. Certainly a combination of more capacity, less congestion yet a sustained favourable balance of demand and supply for the shipping lines ought to make this more likely.
Source: Transport Intelligence, May 13, 2021
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)