Hapag and HMM See Strong Demand Driving Profits for Remainder of 2021
The surge in container shipping volumes that began a year ago is continuing to drive up the earnings of the major container shipping lines. Hapag-Lloyd and HMM became the latest large carriers to report strong increases in profits while saying that they see little change in the market possibly into 2022.
Like many of their peers, both shipping companies pointed to a series of factors contributing to their strong increases in revenues and resulting profits. Hapag reported that its transport volumes rose four percent versus the first half of 2020 to a total of 6,004 TTEU, while HMM reported volumes of 1.93 million TEU which represented better than an eight percent increase in the first half of 2021.
“In a market with very strong demand for container transports, we have benefited from significantly improved freight rates,” commented Rolf Habben Jansen, CEO of Hapag-Lloyd. The combination of demand along with the lack of capacity and bottlenecks along the entire supply chain are fueling the growth. Hapag, for example, reported it recorded a 46 percent higher average freight rate during the first half of 2021.
HMM forecast that, “the highly elevated freight rates are expected to last through this year at the least. The global supply chain will remain strained from terminal congestion in major ports, the shortage of both vessel space and containers, and increased cargo demand.”
Other factors have also continued to the carriers’ strong profits. HMM cited the efficiency of its 12 newly introduced 24,000 TEU vessels. Hapag did not have the benefit of new vessels as its new tonnage is not due to start arriving till 2022 with its biggest new ships scheduled for delivery into 2024, but the company said that it had benefited from “a roughly six percent lower average bunker consumption price.”
The strength of the market helped Hapag-Lloyd to report a nearly tenfold increase in profits, which according to the Financial Times exceeded the profits made over the past decade as a whole. “We are naturally pleased by this extraordinary financial result,” commented Jansen. Similarly, HMM earnings before taxes were up nearly 50 percent to over $2 billion.
“The bottlenecks in the supply chains continue to cause enormous strains and inefficiencies for all market participants,” said Jansen. “We however do not believe that the situation will return to normal any time soon...We currently expect the market situation only to ease in the first quarter of 2022 at the earliest.”
Jansen noted that all of the companies are working together as best they can to meet the challenges and provide some relief while resolving issues across the system. For example, while Hapag waits for its new tonnage the company ordered 210,000 new boxes which Jansen told Reuters are “trickling in and more are still due to arrive in the fourth quarter.” HMM similarly in its earnings announcement noted that it was now buying nearly 125,00 TEU of dry and refrigerated boxes to alleviate the current shortage of equipment. The South Korean company also noted that it has deployed a total of 38 extra-loaders (vessels used to supplement regularly scheduled routes) with the majority sailing to North America.
All of the major carriers have issued strong forecasts for 2021. HMM did not provide specific details in its earnings announcement, but Hapag reaffirmed its earlier forecast projecting full-year earnings before taxes of between $7.5 and $9.5 billion.