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Hapag-Lloyd Cuts 2014 Forecast on Low Peak Season Freight Rates

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November 13, 2014

Berlin Express, a German-flagged, 7506 TEU containership. Image courtesy Hapag-Lloyd

By Nicholas Brautlecht

Nov. 13 (Bloomberg) — Hapag-Lloyd AG revised its full year forecast to a loss as Germany’s biggest container shipping line battles industry overcapacity and freight rates in the peak season before Christmas remained under pressure.

Hapag-Lloyd expects “that the negative operating result of the first nine months of 2014 cannot be compensated for over the remainder of the year,” the Hamburg-based company said in its third-quarter report published today. In August, Hapag-Lloyd still predicted a “positive, but clearly lower 2014 operating result” after a profit of 67.2 million euros ($84 million) in the previous year.

Container shipping continues to suffer from overcapacity as the delivery of vessels coincided with a trade slump triggered by the global financial crisis. The company expects “2015 to be yet another challenging year,” Chief Executive Officer Rolf Habben Jansen said in a statement.

In the third quarter, a 2 percent drop in average freight rates to $1,448 per standard container, or TEU, outweighed a 3 percent fall in fuel costs to $585 a metric ton, it said.

Adjusted profit before interest and tax fell to 33.1 million euros ($41 million) from 66.9 million euros a year earlier, the company said. The net loss was 50.7 million euros after a profit of 16.6 million euros a year earlier, while transport volume rose almost 6 percent to 1.47 million TEU, Hapag-Lloyd said.

Hapag-Lloyd in April agreed to buy Chilean rival Cia. Sud Americana de Vapores SA’s container shipping assets. The deal will make the company the world’s fourth-largest liner with about 200 vessels and 9 billion euros in sales, as it tries to close the gap on the industry’s leaders, including A.P. Moeller- Maersk A/S.

Annual Savings

The European Union, U.S., Chile and Brazil have cleared the combination, which Hapag-Lloyd predicts will generate annual savings of about $300 million. The German company said it expects the closing “in coming weeks.” The merged entity will “become one of the leading providers in the attractive North–South trades” in addition to its existing market leadership in the North Atlantic, said Habben Jansen, who in July followed Michael Behrendt.

Copyright 2014 Bloomberg.

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