Approaching two years as chief executive officer of Hapag-Lloyd, Rolf Habben Jansen has expressed satisfaction with the German carrier’s 2015 results and
sees some encouraging signs on the horizon.
Last year swung to a net profit of 114 million euros ($127.5 million) from a loss of 604 million euros ($675.6 million) in 2014.
He attributed the turnaround to the quick integration of the container business of Chilean carrier CSAV, which Hapag-Lloyd acquired in December 2014, cost-cutting, and a more competitive fleet as Hapag-Lloyd replaced 16 older ships with more efficient chartered tonnage.
This year the company is looking at ways to improve transshipment and stowage.
With CSAV on board, Hapag-Lloyd has grown revenues to 8.84 billion euros ($9.88 billion) in 2015, a 30 percent increase from 2014.
No container carrier is having a great time now because of depressed freight rates, but Habben Jansen added “if history is any guidance the market should recover to some extent because the rates levels that we see in the market today are unsustainable for anyone.”
That change may happen “tomorrow or three months from now. It’s anyone’s guess,” he admitted.
Predicting demand is difficult, he said. “Everybody was wrong in 2015. The beginning of this year has been OK.”
But in terms of supply, he noted, “In a number of trades, people have withdrawn simply because they cannot afford it anymore. In the end, nobody can continue to lose money every month in such a capital intensive business.”
For now, he expects more ships will be idled and scrapped, but low steel prices have been an impediment to this activity and a $30 or $50 per ton difference in scrap prices will probably not determine the decision to recycle a vessel.
The opening of the enlarged locks at the Panama Canal this summer is likely to make some ships uneconomical, Habben Jansen said, adding he did not expect a “landslide shift” in cargo from the U.S. West Coast to the East Coast.
“I think a lot of people have fairly stable logistics supply chains, certainly the big shippers, and that means that they are going to be fairly reluctant to change all of that just because the canal opens up,” he said.
Speaking at the end of February and in March, Habben Jansen said it was still unclear how carrier alliances might be reshaped in the wake of the CMA CGM-APL and COSCO-China Shipping mergers.
“I think the reality of it is that… everybody is talking to everybody,” he said. Habben Jansen expects more clarity within a couple of months, because “people need to start preparing for 2017.”
He did not think the carriers will face a lot of difficulty from regulators in getting new alliances approved, as long as they are not made too large.
Consolidation by carriers could help stabilize shipping rates, and not limit shippers’ choices, Habben Jansen believes.
“If you are a shipper, whether you have 10 options or 20 options—I’m not sure that makes such a material difference,” he said. “For shippers, it is also not ideal to have every week a different rate and to have to pay $1,200 today and $3,000 next week and $500 the week thereafter. Because nobody really benefits from that either.
“While everybody firmly believes that they buy better than the market, in reality that’s not possible,” he added.
Habben Jansen noted the non-vessel-operating common carrier industry had very mixed results in 2015.
With increasing price transparency, he said it will be harder for the NVOs who do nothing other than buy and sell space on vessels, and especially those who only book cargo on a port-to-port basis. “I would not be surprised if you’re going to see a little bit of a shakeout in that group,” he said.
“I know many won’t like it, but the parallel with the travel agencies is definitely there—you still have a lot of travel agencies that are doing really well because they add value for the consumer and because they organize special trips… but those travel agents that you had in the past who just helped you book an airline ticket—they don’t exist anymore,” he said.
Globally, Habben Jansen explained that about 65 percent of Hapag-Lloyd’s business is port to port, and another 35 percent is door to door or port to door at least at one end.
“I think that is generally a good thing. It’s also different from trade to trade. Between Asia and Europe the percentage is relatively low, on the Atlantic it’s relatively high, and in the TP it’s also fairly high,” he said.
The largest Hapag-Lloyd containerships have a capacity of 13,200 TEUs and it has a fair number of 8,000-9,000 TEUs vessels.
“The only category where we are not present is the 18,000- to 20,000-[TEUs] where today there is not a big urgency, but at some point we will want to get access to some of that tonnage, too. Whether that is through charter or buying or through an alliance, remains to be seen,” Habben Jansen said, noting the marginal benefit of operating bigger ships has become less with the drop in oil prices.
Ocean Transport: Hapag-Lloyd CEO sees beyond gloom
