By Mike Wackett

The chances of Hapag-Lloyd turning a full-year profit were slipping away fast after the German ocean carrier posted disappointing peak season Q3 net profits of €16.6m, compared with €45.6m in the same period of 2012. For the nine months of 2013, Hapag-Lloyd is still in the red to the tune of €56.1m and, unless its GRIs of 1 November ($1,000 per TEU) and 16 December ($750) hold, it is difficult to see the container line finishing the fourth quarter in the black, let alone posting a profit for the year.

And the prospect of these GRIs sticking seem unlikely, given that the spot rate gains this month have already started to see significant erosion. The company’s interim report shows where the damage has occurred, with Hapag-Lloyd’s average Asia-Europe rate plummeting to $1,266 per TEU between July and the end of September – compared with $1,350 for the same period a year ago. Moreover, the freight rate malaise has impacted all the line’s major trading lanes, with each sector showing decreases in average rates on a year ago. However, Hapag-Lloyd did manage to grow its business in the third quarter, carrying 3.6 per cent more containers than in the same period of 2012 at 4.1m TEU – albeit that the total weighted average freight rate fell by 4.3 per cent to $1,506 per TEU.

Hapag-Lloyd commented in its interim report: “Unwavering competitive pressure is making it difficult to implement the urgently needed freight rate increase.” It added that pressure on rates was, in part, also being caused by the relatively small size of the world’s idled containership fleet, which, at around 400,000 slots of capacity, equates to approximately only 2.4 per cent of the total fleet. However, Hapag-Lloyd and its G6 partners are endeavouring to overcome this supply and demand imbalance by voiding a number of sailings this month, the same time as the GRI is being implemented.

Until Hapag-Lloyd is back in a sustained period of profitability, a major headache for the company’s shareholders remains; not least for tour operator TUI, which wants to sell its 22 per cent stake but has accepted that it will not be possible until at least autumn next year.

Getting Hapag-Lloyd back in the black will also be the number one priority for Rolf Habben-Jansen, the Damco chief who has been appointed to succeed outgoing CEO Michael Behrendt in the middle of next year. In a parting shot Mr Behrendt complained of “irrational behaviour in the industry”, causing rates to drop dramatically in October – which he said was “totally incomprehensible”.

Having posted a net loss of €128m for 2012, Hapag-Lloyd was predicting a profit for 2013, but like many of its peers – with the exception of Maersk which is expected to post another quarter of profits – the German carrier has fallen into the red, as container lines continue to fight to fill ever-larger ships.

Meanwhile, the former members of the now-dissolved Albert Ballin consortium, which held 78 per cent of the company, now have a direct stake in Hapag-Lloyd.

Now the world’s sixth biggest container carrier, it was involved with compatriot north-south specialist Hamburg Sud in three months of merger talks which were suspended in late March of this year as “no agreement could be reached on important points”. A merger would have made the combined unit the fourth biggest carrier, behind Maersk, MSC and CMA CGM, and ahead of Evergreen Line.

Reprinted courtesy of The Loadstar (