Container Shipping Bracing for Downturn, Hapag-Lloyd Chief Says
The container shipping industry faces a few years of headwinds as low freight rates, a weak European economy and widening geopolitical turmoil cloud the outlook, the head of the world’s fifth-biggest carrier said.
“I’m certainly concerned about the next 24-36 months because I think we are going to see a downturn,” Hapag-Lloyd AG Chief Executive Officer Rolf Habben Jansen said in an interview on Thursday. “I do expect that the market is going to remain under significant pressure.”
Rates to transport goods in containers are hovering at unsustainably low levels, and it’s impossible to say when that will turn around, he said.
“I don’t know know if it’s a price war, but it’s certainly low prices,” Jansen said, noting that the company has already announced the suspension of some services.
Still, when it comes to the volume of shipments, “I’m probably a little bit more on the optimistic side because I do think we are going to see reasonable growth, both in the fourth quarter but also in 2024,” he said.
He spoke after the Hamburg, Germany-based company reported revenue for the third quarter that missed the average analyst estimate. Its stock fell as much as 6.4% in early trading before erasing losses to climb more than 2%.
Ocean-cargo companies, which handle four-fifths of the world’s merchandise trade, brought in windfall profits in 2021 and early 2022 as consumer demand for goods surged, clogging ports and squeezing ship capacity. Hapag-Lloyd, A.P. Moller-Maersk A/S and other carriers have since watched record-high spot rates for containers tumble below break-even levels.
Copenhagen-based Maersk, the No. 2 carrier, last week said it’s cutting at least 10,000 jobs to shield its profitability in a market that may remain weak until about 2026.
Jansen said Hapag-Lloyd isn’t planning layoffs at this stage, though actions are being taken to reduce costs.
On the global economic outlook, he expressed concern about issues that are weighing on business and consumer sentiment.
“A new conflict in the Middle East — that’s not helpful for the confidence that people have in the future,” he said. “I also believe that interest rates and inflation, we need to see some more movement in the right direction before you will see an effect on global trade.”
Europe is “not the engine today that drives volumes globally,” Jansen said. Meanwhile, the US economy “is still doing fairly well,” and emerging markets such as India and some places in Southeast Asia are doing “reasonably well,” he added.
© 2023 Bloomberg L.P.
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