Hapag-Lloyd CEO said the current market conditions are temporary, and expects the industry will return to the old normal when the COVID-19 crisis ends.
Despite the immense challenges associated with COVID-19, which Rolf Habben Janssen, CEO of Hapag-Lloyd AG, described as one of the biggest operational crises the liner industry has ever seen, he is positive about the future. But he also expects a return to some form of normality, rejecting suggestions that events of the past 12 months reflected structural changes in the sector.
In a webinar presentation, he stressed: “The exceptionally strong demand for containers, the very high freight rates and tight capacity [for both ships and containers] we are experiencing are temporary conditions and not representative of structural change. Hapag-Lloyd fulIy expects the market will go back to normal when the current crisis ends.”
The executive explained that the idled fleet of containerships was at zero when taking into account repairs, maintenance and dry-dockings of tonnage and that containers were in short supply. “Our dry container fleet has never been as fully utilised as it was in Q4 2020,” said Habben Janssen. “It has also been taking much longer for our boxes to be made available to the next customer with our average usage times in Q4 2020 of 29 days up 3.2 days on the corresponding period of 2019.”
He added: “For a company the size of Hapag-Lloyd for every additional day that a container is retained, an extra 35,000 units need to be in the pool so that our existing customers can be supported.” In 2020, Hapag-Lloyd phased in 350,000 additional containers, a mix of owned and leased units. Habben Janssen said further equipment would be purchased in 2021.
Like most ocean carriers, Hapag-Lloyd has benefitted from high freight rates and the company’s ability to trim costs. This has resulted in the group upping its guidance for both Q1 2021 and full year profits with both EBIT and EBITDA expected to be sharply higher than in the same period of 2020 and previous years. At the EBITDA level, Hapag-Lloyd is projecting a profit of US$1.8B, which if achieved would be up 248% up the corresponding period of 2020.
While happy with the company’s improved financial performance and the positive outlook, it is clear clear that Habben Janssen wants an end to what he referred to as a “crazy market”. “It is in our interest that container shipping is economically competitive and sustainable,” he said.