Hapag-Lloyd results in the spotlight after Maersk job cuts
Hapag-Lloyd is set to report its quarterly results on Thursday, just a week after rival Maersk revealed plans to slash 10,000 jobs amid a steep downturn in the shipping market.
Further redundancies and cost-cutting strategies will be keenly on the mind of investors and analysts, as container shipping lines contend with a brutal slump following years of record profits.
Freight rates have nosedived since a pandemic-era bonanza, created by a collision between supply chain disruption and resurgent consumer demand, sent profits into the stratosphere.
Hapag-Lloyd has shown little sign of avoiding Maersk’s woes. The shipping giant saw profits sink more than half during its half year results in August, as weaker freight rates pumelled its bottom line.
Shares are down more than a third in the year to date and chief executive Rolf Habben Jansen warned in September of “rough seas ahead” amid a “challenging market environment” and “weak” demand for container transport.
Container shipping groups are also contending with an oversupply of ships flooding the market, after profligate spending during the pandemic boom.
In a note in October, Deutsche Bank cut both Maersk and Hapag-Lloyd’s rating from hold to sell.
Andy Chu, Deutsche Bank’s head of European transport equity research, wrote: “We think that the container shipping industry is not reacting quickly enough to address a significant oversupply of new capacity.”
He flagged “significant oversupply,” muted demand and higher costs, while freight rates are expected to “remain under pressure.”
Speaking on the wider sector’s outlook following the job cuts announcement, Maersk chief Vincent Clerk told Bloomberg News:”We are getting fit for what could be leaner times for here ahead, that means… making sure we preserve some powder for whatever opportunity will also arrive here during this cycle.”
Short-lived hopes for a revival in ocean freight shipping rates in September have been tempered by recent industry forecasts.
The latest Xeneta Shipping Index, which tracks freight rate developments monthly, fell 2.6 per cent in October, continuing a trend that has seen over 62 per cent wiped off over the last 12 months.
Emily Stausbøll, market analyst at Xeneta, said: “Carriers have had some success in capacity management, limiting the impact of the 3.3 per cent decrease in global shipping volumes year-to-date. However, this hasn’t been enough to support sustained rate increases on a global basis.”
Stausbøll said she expects an “even more severe decline” coming into the new year, with 2024 still looking “set to be a stormy time for them.”