The 10th largest container carrier warns that 2015 will likely see capacity outpace demand for shipping.
German ocean carrier Hamburg Süd, one of the leading carriers in South American trades, had revenues of 5.19 billion euro ($6.9 billion) dollars in 2014, a decrease of about 1.3 percent compared to 2013.
“The weak economic development in Brazil, Argentina and Venezuela contributed to the low, and in some cases negative, growth on the North-South trade lanes,” the Hamburg-based carrier said in a press release outlining its performance last week. “Consequently, Hamburg Süd and its Brazilian subsidiary Aliança were able to increase transport volume by 2 percent only to around 3.4 million TEUs.”
It noted revenue was affected by both falling freight rates and a weak U.S. dollar, its most important earnings currency.
Hamburg Süd is part of the privately-held Dr. August Oetker conglomerate, which has operations in the food, beer, wine and spirits, banking, publishing, hotel and chemical industries, and does not publicly disclose all of its financial statements. But the company did say, “Results from liner operations remained positive, albeit significantly lower than in the previous year.”
“While global economic growth in 2014 remained at previous year’s level with 3.4 percent, container shipments increased at a considerably higher rate of 5.4 percent compared with the previous year (3.6 percent),” the company said in a statement. “However, available global slot capacity on board container ships also increased in the past year, outpacing container transport volume. Consequently, it was not possible to reduce the existing overcapacity and freight rates in most trades declined further. A positive effect came from fuel prices, which fell sharply from the fourth quarter of the year.”
Hamburg Süd is among those companies increasing the size of its fleet. It had a fleet of 112 containerships — 66 owned and 46 chartered-in — at the end of 2014, up from 103 containerships — 58 owned and 45 chartered-in — at the end of 2013. The company also grew the size of its tramp ship fleet, consisting entirely of chartered ships, from 51 to 56 last year.
As a result, the container capacity of Hamburg Süd’s fleet grew 17.5 percent in 2014 to 537,000 TEUs. As in the previous year, the fleet was expanded by additional ships in the Cap San series with a capacity of 9,600 TEUs each. These were complemented by additional ships in the San class with a capacity of 9,000 TEUs and a high number of reefer slots for refrigerated containers. The company now has 13 ships that have capacity of at least 9,000 TEUs, deployed mainly with their large reefer capacity on the Asia-Europe and Europe-South American East coast routes. Aliança also introduced two 4,800-TEU wide-beam ships in its cabotage fleet, further enhancing cost efficiency.
Since the end of 2014, Hamburg Süd has continued to grow, acquiring the liner services of Compañía Chilena de Navegación Interoceánica (CCNI) at the end of last month.
The CCNI ships operate between the West Coast of South America on the one hand and Asia, North America and Europe on the other.
Hamburg Süd said the acquisition increased the shipping group’s transport volume “by slightly less than 10 percent, or around 300,000 TEUs. In certain trade lanes, Hamburg Süd achieves market leadership and is developing routes on which it has not previously operated. The integration will take place in the first half of 2015.”
As of Thursday, Alphaliner ranked Hamburg Süd as the 10th largest container carrier in the world with a fleet of 122 ships — 41 owned and 81 chartered — and total capacity of 581,571 TEUs.
“Despite waning momentum, with an increase of approximately 7.4 percent the Chinese economy once again proved to be the engine of global growth in 2014. The situation in Brazil remains unsatisfactory, with the economy stagnating in 2014, and other South American economies, such as Argentina and Venezuela, also failed to recover. On the back of a slight upturn in Europe (+0.9 percent) and continued stable growth of 2.4 percent in the USA, overall global economic growth increased by 3.4 percent to previous year,” the carrier said.
Hamburg Süd noted that Latin American trade is lagging other container routes, and that it faces the prospect of additional capacity cascading into routes to and from Latin America.
“Worldwide container transport increased significantly compared with 2013 by 5.4 percent in 2014, albeit to varying degrees from one market to another. Whilst from 2012 to 2014, growth rates of between 3 percent and 6 percent a year were recorded on the Asia-Europe and Asia-North America routes, the Latin America trade lanes grew by an average of around only 1.5 percent a year,” it said.
“This meant there was no scope for the restoration of freight rates worldwide in 2014. The trend towards weaker development of freight rates on the North-South trade lanes as opposed to East-West services continued. The deployment of modern 14,000- to 18,000-TEU vessels on services to and from Asia leads to smaller ships being pressured out of the market on these routes. Given that the majority of these are less than 10 years old they are not scrapped, but rather cascade into the North-South trades and increase the pressure on freight rates on these routes.”
In another major development this year, Hamburg Süd has begun operating in the East-West trade lanes “in order to expand (its) liner network and leverage the resulting logistical advantages.”
The company is cooperating with United Arab Shipping Corp. (UASC), a member of the Ocean3 consortium with CMA CGM and China Shipping.
Hamburg Süd said the cooperation enables it to “provide slot capacity at competitive rates. In return, UASC obtains slots on selected South America routes operated by Hamburg Süd. Through the collaboration with UASC, Hamburg Süd is able to reduce its dependency on South America and offer its customers an extended network that is well accepted. It also allows the Shipping Group to tap new growth and cost reduction potential both on shore and at sea.”
Looking forward to 2015, Hamburg Süd said, “According to forecasts of the International Monetary Fund (IMF), the global economy and world trade are set to grow at a slightly higher rate than in 2014, by 3.5 percent and 3.7 percent respectively. The US economy in particular will continue to gain in momentum, and growth in the eurozone is also expected to be slightly higher. China is forecast to remain the driving force behind global growth with 6.8 percent, albeit with a less dynamic pace.”
It warned these development do not “imply a sustained recovery of container liner services in the coming year. On the back of low interest rates, fresh money is continuing to be pumped into shipping. As a consequence, a further acceleration of net slot growth is likely for 2015. With a rise in global container transports of around 5 percent and anticipated record growth in slot capacity of 8 percent, the overcapacity of container slots is continuing to increase. On the East-West trades this increase will focus on large ships with a capacity in excess of 10,000 TEU.”
“Positive effects for 2015 can be expected in the short term to continue to come from low fuel prices, which at least for the time being can offset the fall in freight revenues. However, the industry will see sustained earnings improvements only if strict cost and capacity management is accompanied by sustained discipline in terms of rates.”
Hamburg Süd: Container operations made money in 2014 on slight cargo increase
