Hapag-Lloyd Sees Shipping Demand Up, More Mergers in 2018

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HAMBURG, Jan 18 (Reuters) – German shipping group Hapag-Lloyd sees demand for transport growing 4 percent in 2018 and expects more shipping firms to merge in the year, the chief executive said.

CEO Chief Executive Rolf Habben Jansen also said Hapag-Lloyd, which merged with its Arab peer UASC, could achieve 85 to 90 percent of targeted annual savings from the deal of $435 million this year and 100 percent from 2019.

More savings could be made in future, he told reporters in Hamburg, where he reiterated guidance for rising full-year 2017 earnings before interest, tax, depreciation and amortisation (EBITDA) and for EBIT. Figures will be published on March 28.

“The year 2018 has started well, charter rates are increasing and the size of the idle fleet is low,” he said.

“We also have many new ships which have made us absolutely competitive, there is a great difference to four or five years ago,” he added.

Habben Jansen estimated transport demand growth at 4 percent in 2017, at 4.5 percent in 2018 and more than 4 percent in 2019.

Shipping has struggled with overcapacity, price wars and freight rates far below break-even levels, but industry analysts say the worst may be over.

The firm’s 2017 nine-month operating profit rose more than tenfold, but it retained a net debt position of $7.3 billion, which Habben Jansen said would be tackling.

The company aimed to use its free cash flow in the next two years for debt reduction, he said.

After merging with UASC, Hapag-Lloyd is now the world’s fifth biggest world shipping firm. Habben Jansen said he saw further consolidation in the industry.

“Some nine of formerly 20 companies will have disappeared by the end of 2018,” he said.

But he said rising oil prices, now around three-year highs, were pushing up the cost of bunker fuels, presenting a challenge for shipping firms.

(Reporting by Vera Eckert; Editing by Edmund Blair)

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