Freight Rates Pulling Hapag-Lloyd Down

Hapag-Lloyd, Germany’s shipping powerhouse, has posted results for the first six months of 2014. The company reports a decrease in revenue compared to 2013, even though more cargo was shipped than in the first six months of 2013.

At around 2.9 million TEU, 5.8% more cargo was shipped compared to the last year’s 1H results. In contrast, the average freight rate developed negatively as a result of persistently tough competition across the market.

The average freight rate in the first half of 2014 fell by 98 USD/TEU year on year to 1,424 USD/TEU.

Revenue in the first six months amounted to USD 4.28 billion – USD 192.4 million lower than the prior year period, due to the poor freight rate development and the much weaker US dollar.

The company’s net result of USD -231.5 million (prior year period: USD -97.1million) includes one-off costs relating to the CSAV transaction.

‘The fact that we ended up with this unsatisfactory result despite clear efforts to cut costs is down to the disappointing development of freight rates across all trades,’ said Rolf Habben Jansen, CEO of Hapag-Lloyd.

‘We expect, however, to see a better result in the second half of the year even though the environment remains tough. We’ll continue to cut costs, and our merger with CSAV will enable us to realize synergies worth at least USD 300 million per annum in the future.’

 The negative trend might be further increased by Russia’s sanctions on agricultural and alimentary products originating from the USA, the EU, Australia, Canada and Norway.

Hapag-Lloyd issued an advisory note to its clients stating that in view of the ban they are stopping the acceptance of only these commodities originating from the EU countries, the USA, Canada, Australia, as well as Norway with immediate effect and until further notice.

The company will continue to accept all other commodities and origins that are not banned by the Russian government.

Containers that have already been loaded on the company’s vessels towards Russia and which fall in the definition scope of this ban, will be returned to/discharged at the respective transshipment port, awaiting further instructions.

Affected containers that have already been returned full to the respective loading terminal shall not be loaded to the scheduled vessel but remain at the terminal awaiting clients’ further instructions.

All costs associated with either of the above two scenarios will be for account of the shipper/consignee.