Hapag-Lloyd AG update
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One of the world’s largest shipping companies reported profits in the first half of the year that far exceeded the overall profits of the past ten years. This shows how the disruption of the global supply chain can bring huge profits to carriers.
Due to strong cargo demand, port bottlenecks and shortage of empty containers, freight rates have soared. Hapag-Lloyd’s net profit for the six months ended June increased tenfold from the previous year, reaching 2.7 billion euros. In comparison, the total net profit for the past 10 years was 978 million euros.
“What we saw in 2021, I don’t know if we will see it again,” CEO Rolf Habben Jansen told the Financial Times.
Due to demand fluctuations due to the lockdown and the booming e-commerce, the pandemic has caused serious chaos in the supply chain and transportation. Containers have been in short supply, and ships have been stuck in overwhelmed ports waiting to berth, causing transportation costs to soar since the end of last year.
In the first six months of this year, Hapag-Lloyd’s average freight rate per 20-foot container increased by 46% to US$1,612.
It is the latest large container shipping group to report substantial profits in the first half of the year and an optimistic outlook in the context of supply chain disruptions. The industry experienced the lowest profitability in a decade before the pandemic broke out.Danish rival Maersk The annual profit forecast was raised last week Because it reported a series of outstanding second quarter results.
After a dock worker tested positive for Covid-19, a terminal was closed this week in Ningbo, China, the world’s third busiest port. This may be the latest incident threatening the return of global logistics to normal.
Habben Jansen warned that Ningbo’s “first week will be decisive”, adding that equipment shortages and delays cannot be resolved quickly.
“But judging from today’s market environment, we don’t think the situation will return to normal soon,” he said. “We currently expect that the market situation will only ease in the first quarter of 2022 at the earliest.”
As freight prices will remain high, the German group reiterated its expectation that its annual profit before interest and taxes will fall by between 7.5 billion and 9.5 billion U.S. dollars, a figure that will once again easily exceed its combined performance over the past 10 years.
Hapag-Lloyd used its profit in the first half of the year to reduce its net debt by $1.5 billion and substantially increased its dividend.
Most of its business is to sign long-term fixed-rate contracts, but the cost for shippers to obtain space in the market in a short period of time has soared to astronomical figures. The cost of the route from Asia to North America has increased tenfold, reaching US$20,000 per 40-foot container. above.
“The relationship between spot interest rates and contract interest rates is too abnormal,” Habben Jansen said.