The precarious security situation in the Red Sea dominated the business development of Germany's largest container shipping company Hapag-Lloyd at the beginning of the year.

"Rates stabilized in the first quarter due to the rerouting of ships around the Cape of Good Hope and the higher demand for capacity," explained Group CEO Rolf Habben Jansen on Wednesday, referring to the freight rates that are central to the industry. However, the detour via the southern tip of Africa had also led to a significant increase in expenses. "However, this was largely offset by active cost management." Habben Jansen is somewhat more confident about the year as a whole, even if the forecast remains difficult.

In the first quarter, the traditional Hamburg-based group suffered a significant drop in profits compared to the same quarter of the previous year, which was still characterized by the coronavirus pandemic. Operating profit (EBIT) fell by a good 79 percent to 365 million euros. Despite the increase in charges as a result of the crisis in the Red Sea, freight rates averaged USD 1359 per standard container (TEU), down on the previous year. Hapag-Lloyd cited this as the main reason why turnover fell by 24 percent to just under EUR 4.3 billion in the first quarter. Consolidated profit fell to 299 million euros - less than one sixth of the previous year's figure.

"Even though our results are significantly below the exceptionally strong figures of the previous year due to the normalization of supply chains, we are pleased to have made a good start to the new year," emphasized Habben Jansen with a view to the end of the coronavirus pandemic. With the result of the first quarter, Hapag-Lloyd sees itself out of danger of slipping into the red in terms of EBIT in 2024. The company now expects to achieve a black zero to one billion euros for the year as a whole. In March, the number five in international container shipping still considered a loss of one billion euros possible.

MANY NEW SHIPS STABILIZE SUPPLY CHAINS

Like other major shipping companies, Hapag-Lloyd has practically stopped sending ships through the Red Sea since mid-December following attacks on freighters by Houthi rebels from Yemen, instead diverting them around the southern tip of Africa. January to March were therefore the first months that were completely dominated by the crisis for the shipping companies. The detour leads to delays, higher costs and more CO2 emissions. However, it also allows the shipping companies to charge higher fees. It also alleviates fears of overcapacity: "The numerous new ships that have been and will be delivered throughout the industry in 2024 will make a decisive contribution to ensuring that supply chains continue to run without too many interruptions," explained the Group CEO.

However, even the updated forecast is still subject to considerable uncertainty due to fluctuating freight rates and the global political situation, according to Hapag-Lloyd. The company continues to assume that a large part of the forecast result will be generated in the first half of the year. Habben Jansen had said at the end of April that he expected the crisis in the Red Sea to end before the end of the current year.

Maersk had already presented figures for the first quarter of the year before Hapag-Lloyd. The Danish company also benefited from higher freight rates and increased demand. Maersk is the second largest freight shipping company in the world after the privately owned and secretive MSC. The Danish group is therefore regarded as a yardstick for the state of the shipping industry and global trade.

(Report by Elke Ahlswede and Vera Eckert, edited by Ralf Banser. If you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)