The CEO of shipping line Hapag-Lloyd has said that the company expects to see a moderate recovery on freight rates in the upcoming two quarters of 2016.
The company, which recorded in 2015 its first net annual profit since 2010 following cost-cutting measures and its merger with the container business of Chilean shipping company Compañía Sud Americana de Vapores (CSAV), expects however that freight rates will still be moderately decreasing in 2016.
The CEO Rolf Habben Jansen explained during a conference call presenting the company’s 2015 results: “We do expect that the freight rates for 2016 will be below the ones that we have seen on average in 2015. That however does not mean that we expect it to stay at the level which is in the first quarter, which is below the average.”
He explained that the business expects therefore to see a recovery in freight rates, although not a “massive one”, throughout 2016, adding that although the market is tough, there are some encouraging signs for the industry.
“We have seen that on the two most problematic trades in 2015, being Asia-Europe and Asia-Latin America, capacity measures have been taken that should have an effect,” he added.
Habben Jansen said that this is probably the first time he is reasonably optimistic about the various factors being in place for freight rates.
He added: “We were not very bullish but rather bearish on freight rates, because we felt that after everybody got too optimistic with falling oil prices, and as such everybody started deploying too many ships, it would take time before people would realise that the way that rates are going to tumble is going to hurt our bottom line.”
Hapag-Lloyd reported that its average freight rate went down by 14% from 1,427 US$/teu in 2014 to 1,225 US$/teu last year.
The shipping line recorded a €114m (US$127) profit last year, compared to a €604m (US$675m) loss recorded in 2014.
Hapag-Lloyd’s transport volume increased by 25% year-on-year from 5.9m teu in 2014 to 7.4m teu last year, with revenue going up by to €8.8bn (US$9.8bn) in 2015 from €6.8bn (US$7.6bn) in the previous year.
The company explained in a statement that the increases in volume and revenue were primarily attributable to the acquisition of CSAV’s container activities.
Habben Jansen said in a statement that the 2015 results were in line with the company expectations, adding that the shipping line “is back among the top performers in the industry”.
“We have worked hard for this success by quickly integrating CSAV’s container business and by exploiting the synergies, as well as with the OCTAVE cost-cutting and efficiency programme, which will make a total earnings contribution of in total US$600m from 2016,” he added.
“More than 70% of the expected result improvements have been realized in 2015 already. On the back of this success, we already launched OCTAVE 2 towards the end of 2015.”
The company said in a statement that its development so far in 2016 is line with expectations, adding that this year it will continue to work on its competitiveness.
Habben Jansen added: “We believe that the ongoing consolidation and the upcoming new alliance set-up should add stability to the market, and that there will be some recovery of the market.”