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Carriers face ‘bumpy ride’ on rates, but no return to 2016 losses
American Shipper
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Ocean freight rates could slide further before stabilizing, although the market is unlikely to see a repeat of six years ago when carriers sustained significant operating losses, Hapag-Lloyd CEO Rolf Habben Jansen said Thursday.“Right now, there is a little bit of a bumpy ride, but rates will stabilize,” Habben Jansen said. “I think the market will settle where carriers see a reasonable return, but not excessive.” Still, “it’s not all bad,” the CEO noted, pointing out that transport risks, including port congestion and inland delays, have eased, although waiting times at the US East Coast ports and those in Northern European remain elevated.

Asked if carriers would see a hard or soft landing in rates, Habben Jansen told reporters during a media briefing for the company’s third-quarter earnings that the market is different from 2016 and 2017 when carriers were unable to cover operating costs. Drewry estimated carriers saw collective operating losses of $3.5 billion in 2016 amid weak demand and a poor rate environment. “Rates have come down quickly from a high level and may come down further” due to weakening demand and increased capacity, Habben Jansen said. While they could “dip below the water ... long-term rates won’t be below cost level,” he said, adding that although rates have ped sharply this year, they are still above pre-COVID-19 levels.

Global container volumes fell 8.6 percent in September compared with a year earlier, while trans-Pacific volumes slumped 24.5 percent in the same period, according to latest figures published Monday by Container Trade Statistics (CTS). Habben Jansen thought the slide in rates coupled with weakening demand would likely cause pop-up carriers — mainly intra-Asia lines that entered the trans-Pacific trade and to a lesser extent Asia-Europe when demand and rates were strong — to pull out. “A number of people jumped in when the market was high,” he said. “I do expect some of those, most of those, will withdraw from the trade, simply because they can’t maintain rate levels.”

Habben Jansen was commenting after Hapag-Lloyd reported its best-ever results Thursday, with third-quarter net profit, total revenues, and average freight rates all at record levels. “I think those are numbers that we may not see again in our lifetime,” he said. Third-quarter net profit, average freight rates, and total revenues were all higher in the third quarter compared with the previous two quarters. This was due to the strength of contract rates which remained elevated compared with spot rates, Habben Jansen said. Net profit between July-September climbed to $5.6 billion, up from $4.8 billion in the second quarter and $4.7 billion in the first. Total net profit in the first nine months more than doubled to $14.7 billion, the company said in its earnings statement. Total volumes in the first nine months of 8.9 million TEU were flat with last year. Total revenues topped $28.4 billion for the first nine months, against $18 billion last year.

Strong results were also reported Thursday by Taiwan carrier Yang Ming Marine Transport Corp., which saw a 51 percent jump in net profit for the first nine months to $5.7 billion. Total revenue climbed to $10.8 billion through September compared with $7.3 billion last year.

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