Hapag-Lloyd Reports Weak Demand and Lower Freight Rates in Quarterly Earnings

Hapag-Lloyd has released its quarterly earnings report, revealing continued weak demand and significantly lower freight rates compared to last year. The world’s fifth largest liner operator expects more challenges ahead for the container shipping market unless spot freight rates recover.

In the first nine months of 2023, Hapag-Lloyd reported a Group EBITDA of $4.5 billion and a Group EBIT of $3.0 billion. The Group profit stood at $3.4 billion. However, these results are significantly below the prior-year level due to the severe change in market conditions.

Hapag-Lloyd currently operates a fleet of 264 ships with a total transport capacity of 2.0 million TEUs.

Due to its expanded terminal business, the company is splitting its business activities for the first time into Liner Shipping and Terminal & Infrastructure segments.

In the Liner Shipping segment, the EBITDA decreased to $4.5 billion, with revenues falling to $15.2 billion. This decline in revenues is primarily attributed to a lower average freight rate of 1,604 USD/TEU, compared to 2,938 USD/TEU during the same period last year. The transport volumes, however, improved in the third quarter, rising by just under 5%. Despite this, the combined volumes for the first nine months of the year remained almost on par with the prior-year period.

Transport expenses experienced a year-on-year decrease of 11%, amounting to $9.6 billion, due to the ongoing normalization of global supply chains and a lower average bunker consumption price.

In the Terminal & Infrastructure segment, Hapag-Lloyd achieved an EBITDA of $38 million and an EBIT of $29 million in the first nine months of 2023. This segment comprises Hapag-Lloyd’s stakes in 20 terminals across various regions.

As of September 30, 2023, Hapag-Lloyd’s fleet capacity had increased by 9.5% compared to 2022, with 61% of the fleet owned by the Group. Seven newbuilds were commissioned in the first nine months of 2023, including the Berlin Express, its first 23,664 TEU vessel with a high-pressure dual-fuel engine that can run on both LNG and conventional fuel. The company’s orderbook currently includes nine 23,664-TEU newbuilds and two 13,000-TEU newbuilds, with a total capacity of 239,000 TEU. An additional vessel of 13,250 TEU will be added to the fleet as a long-term chartered vessel in 2024.

Rolf Habben Jansen, CEO of Hapag-Lloyd AG, acknowledged the challenges faced by the company and highlighted efforts to reduce expenses.

“Freight rates are below the prior-year level and, as expected, fell again in the third quarter – which is reflected in much lower earnings. In response, we are working hard to reduce our expenses even more, such as by achieving savings on the procurement side and making adjustments to our service network. Nevertheless, if spot rates do not recover, we could face some challenging quarters in this subdued market environment,” said Jansen.

Looking ahead, Hapag-Lloyd has provided a more specific forecast for the full year 2023, predicting an EBITDA in the range of $4.5 to 5.5 billion and an EBIT in the range of $2.4 to 3.4 billion. However, the company noted the forecast is subject to uncertainty due to geopolitical conflicts, persistent inflationary pressures, and high customer inventory levels.

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