Container shipping rates have weakened to a level “not sustainable” for box carriers in the long run, with their operating expenses under pressure from inflation, Hapag-Lloyd CEO Rolf Habben Jansen said May 11.
S&P Global Commodity Insights Platts Container Index, a weighted average of spot rate assessments on key routes, was assessed at $1,059.59/FEU on May 10, down from $1,380.69/FEU on Jan. 3. It was at $7,275.61/FEU at the beginning of 2022.
“That level, if for the long run, is not sustainable,” Jansen said in an earnings call, adding that high inflation was expected to lead to more operating expenses.
In spite of recent falls in marine fuel prices, German-based Hapag-Lloyd suggested in its quarterly report that overall cost pressure would remain high amid strong macroeconomic headwinds.
The 0.5% sulfur fuel oil Bunkerworld index, a market indicator for the prevalent bunker fuel by S&P Global, fell to $561.71/mt on May 10 from $623.69/mt Jan. 2. It stood at $615/mt at the beginning of 2022.
But freight market environments have “normalized” in recent months, even though weak demand has led to lower shipping rates, Jansen said.
Hapag-Lloyd said global container volumes fell to 40 million TEU over January-March amid destocking versus 42.9 million TEU during Q1 2022, citing Container Trades Statistics figures.
Look forward, Hapag-Lloyd said global container shipping volumes will increase 1.8% in 2023 based on Accenture Cargo’s latest prediction, down from a growth of 2.2% in the December forecast.
“Transport volumes [are expected] to continue to decline initially in the first half of 2023,” the company said in the report. “Growth is not expected until the second half of 2023, mainly due to the low comparison base.”
Weak market
Hapag-Lloyd transported 2.84 million TEU in January-March, down 4.9% from 2.99 million TEU in the same period of 2022. Its average freight rate fell to $1,999/TEU from $2,774/TEU.
The company’s bunker costs rose to Eur622.5 million ($680 million) in the first quarter from Eur581.4 million in the year-ago period, as its average bunker purchase price increased to $645/mt from $613/mt.
Amid weaker business conditions, the company’s revenue fell to Eur5.6 billion from Eur8 billion. EBITDA dropped to Eur2.2 billion from Eur4.7 billion.
The company has kept its full-year 2022 EBITDA guidance at Eur4 billion-Eur6 billion, compared with Eur19.4 billion last year.
Source: Hellenic Shipping News
