Hapag-Lloyd Sees Container Shipping Recovery in Second Half

(Bloomberg) -- Hapag-Lloyd AG said it sees the container market starting to pick up in the second half, in time to keep the German sea-freight company’s 2020 earnings forecasts in sight.

Global container transport will decline by about 11% this year, and major shipping routes to and from Asia will likely see capacity reductions of at least 20% in May and June, the company said in a statement Friday. A broad recovery will then kick in next year, it added.

As long as the pandemic peaks in the second quarter and conditions improve thereafter, Hapag-Lloyd should hit its range for earnings before interest and taxes of between 500 million euros ($540 million) and 1 billion euros this year. The upper end of that range is unlikely to be achieved, the company said.

Shipping demand will be buoyed by a record-low order book of new vessels and ships taken out of service to retrofit them with exhaust cleaning technologies. Freight companies have also idled vessels and discontinued charters, further reducing container space, Chief Executive Officer Rolf Habben Jansen said in an interview.

“We will reduce our own capacity by something like 4% to 6% this year, we have that flexibility,” the CEO said. “We try to ensure our ships don’t sail half-empty as that means costs per container double. In the industry, we all have that cost pressure and we won’t be the only ones doing this.”

Jansen is overseeing a costs drive to save a mid-three-digit million U.S. dollar amount. New vessel purchases are on hold for now, and investment on new projects and maintenance is being pared back, where possible, the company said.

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