Hapag-Lloyd is optimistic about the year ahead, despite global trade tensions, the German container shipping company’s chief executive said on Thursday after a first quarter earnings rise.
“Despite all the uncertainty, we see a somewhat stable development,” Rolf Habben Jansen told Reuters, adding that trade wars have so far had a limited effect on Hapag Lloyd’s business.
U.S. President Donald Trump said on Wednesday that China had broken the terms of a trade deal, adding he would not back down on imposing new tariffs on Chinese goods.
Habben Jansen said that he still expects freight rates to increase significantly in the second quarter, after first-quarter prices were 5 percent above the year-earlier period.
Hapag-Lloyd shares were up 1.1 pct at 0733 GMT, outperforming the market which was down 0.6 percent.
Transport volumes would also rise, while after years of overcapacity the global fleet would increase by only 3-4 percent this year with orders for new ships standing at a “healthy” 11 percent of current capacity.
“Hapag-Lloyd is thus growing ahead of the market, with global volumes up c. 0.5 percent in the first three months of 2019,” analysts from Fearnleys said in a note to clients.
An economic slowdown following the financial crisis forced some shipping companies out of business and led to mergers such as Hapag Lloyd’s 2017 link-up with UASC, which is owned by six Gulf states. This made it the fifth largest shipping operator.
However, Habben Jansen said that he does not expect much consolidation in the next 12-24 months as the scope for additional scale effects was limited.
In the first quarter, Hapag-Lloyd’s transport volumes edged up to 2.9 million 20-foot equivalent units (TEUs), while fuel costs were 14 percent higher than in the year-earlier period.
New International Maritime Organization (IMO) rules are restricting ships from using fuels with high sulphur content, which will cost Hapag-Lloyd $1.1-1.2 billion annually, Habben Jansen said.
The company will retrofit 10 of its 235 ships with so-called scrubber technology that reduces sulphur emissions, while one ship will be converted to run on liquefied natural gas.
Hapag-Lloyd reported a 96 million euro ($107 million) first quarter net profit, up from a year-earlier loss of 34 million, citing higher transport volumes and better freight rates.
Earnings before interest, tax, depreciation and amortisation (EBITDA) more than doubled to 489 million euros from 216 million euros, in part due to new accounting rules and favourable exchange rates.