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Soaring rates, congestion drive Hapag-Lloyd to ‘extraordinary’ 2021 result

The disrupted ocean shipping market is providing handsome returns for the carriers, and Hapag-Lloyd is heading for a consecutive record annual result. Photo credit:

Hapag-Lloyd reported what it called an “extraordinary” operating result Tuesday, with average rate levels through 2021 rising 80 percent year over year to offset flat volumes and almost double the carrier’s annual revenue.

While profit and loss figures will be provided when Hapag-Lloyd publishes its annual report on March 10, a record net result is guaranteed. The carrier has already told investors to expect a four-fold gain in operating profit for 2021 compared with the previous year, forecasting $12 billion to $13 billion.

Revenue in 2021 reached $26.4 billion, built on average rate levels of $2,003 per TEU that added $11.8 billion to the revenue achieved in 2020.

Hapag-Lloyd’s other main earnings metrics for 2021 were also deep in the black. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were up more than four times compared with 2020 at $12.8 billion, while EBIT at $11.1 billion was 7.4 times above that achieved in 2020.

The soaring rate levels allowed Hapag-Lloyd to grow its earnings despite volume that was flat year over year at 11.9 million TEU.

“The main drivers of these positive business developments have been significantly improved freight rates resulting from very strong demand for goods exported from Asia,” Hapag-Lloyd said in a statement. “At the same time, the major disruptions in global supply chains have led to a significant increase in transport expenses.”

Congestion cuts capacity, raises rates

Flat or declining volumes, coupled with rising rates, have been a constant in the container shipping sector for the last two years, caused by port congestion and inland logistics bottlenecks in Asia, North Europe, and particularly in the US. The congestion has delayed vessels and destroyed schedule reliability, with ships missing berthing windows, blanking sailings, or omitting ports to shorten rotations. That has effectively limited capacity, which has cut volumes on the major trades and pushed rates higher.

Short-term rates of 90 days or less from Asia to the US West Coast rose 105 percent through 2021 to end the year at $8,738 per FEU, while long-term contract rates of three months and above rose 80 percent to $5,620 per FEU, according to rate benchmarking platform Xeneta. Asia to North Europe short-term rates doubled through 2021 to reach $8,219 per TEU on Dec. 31, while long-term rates of three months and above tripled to $5,001 per TEU.

On the trans-Atlantic westbound trade, short-term rates through 2021 rose 224 percent to end the year on $5,278 per TEU, while long-term contract rates almost doubled to $4,817 per TEU.

The port and inland logistics woes in key markets, especially the US, were highlighted by Ocean Network Express (ONE) this week when the carrier announced its fiscal half-year results. Despite posting a record six-month net profit of $6.7 billion, ONE said there would be little improvement in the port and inland logistics problems this calendar year and has forecast annual net profit for its fiscal year ending March 31 of $11.7 billion — almost three times that of the previous year.

Maersk on Jan. 14 added $1 billion to its anticipated 2021 operating profit that it now expects to be as high as $24 billion. Cosco Shipping Holdings, state-owned parent of Cosco Shipping and OOCL, expects to report an annual net profit for 2021 of $14.2 billion, eight times higher than in 2020.