Container shipping remains a profitable business. The latest numbers from Hapag-Lloyd illustrate that despite all of the additional costs and operational problems that container shipping lines face, they are sustaining respectable margins.
The third quarter results from Hapag-Lloyd show that demand in the third quarter increased, sustaining sales. Although profits fell year-on-year, they climbed markedly through the third quarter. Revenue in the third quarter increased by 18% year-on-year, driven-up by volumes and continuing strong freight-rates. Over the year revenue was stable, with third quarter seeing a better-than-expected rise in demand and prices. Both Earnings Before Interest Depreciation (EBITDA) and Amortisation and Earnings Before Interest and Tax (EBIT) were up markedly over the quarter, with the latter jumping 119% year-on-year. However, the profitability picture for the first nine-months of the year overall has deteriorated, with Group Profit down 46% year-on-year. For the year, profit margins are down by 35% to 12.7%, which is much lower than those of the boom years from 2020-2022, but is very respectable by historical standards.
The key to these numbers is the market reality of a combination of good levels of demand combined with high prices. Hapag-Lloyd said the market was one that “Global container volumes surprised to the upside, mainly due to strong exports out of Asia and higher consumption in North America” .
The volumes of freight carried by Hapag Lloyd measured in TEU are up 4.6% over the nine-months the end of the third quarter and up 3.8% in the third quarter year-on-year. The company said that the market generally has increased by 6.3% year-on-year for the nine months of the year-to-date. What made things so much better in the third quarter was the 13% rise in the average freight rate. Costs are higher due to more complex container management, but the rise is not much more than 3% per container.
Such is the optimism in the market and the intensity of utilisation of Hapag-Lloyds fleet, that the Hamburg based shipping line is buying a further 24 new ships. 12 of these are 16.8 thousand TEU vessels, although the implications for Hapag Lloyd in the short-term are not great as they will not be delivered until 2027-2028.
Source: Ti Insight
Author: Thomas Cullen
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