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Germany’s Hapag-Lloyd’s financial performance in 2013 fell “well short” of expectations, with the ocean carrier reporting a €97.4m (US$134m) loss – the consequence of carrying more containers at lower rates.

Revenue slipped from €6.8bn in 2012 to €6.6bn last year, with the average freight rate falling to $1,482 per teu against the $1,581 achieved in 2012.

Outgoing chairman Michael Behrendt blamed the continued market “irrationality” which, he bemoaned, Hapag-Lloyd had been “unable to avoid”.

Clearly however, Hapag-Lloyd was not prepared to concede market share during the 2013 rate war, as evidenced by its increase in transported volumes to 5.5m teu, versus the 5.25m teu carried the previous year. Moreover, in the fiercest arena of battle, the Asia-Europe tradelane, Hapag-Lloyd carried 9% more containers.

But Asia-Europe was not the only problematic trade for the carrier. The narrative repeated itself on all five of its routes, with average revenue per teu declining across the board, caused by the cascading of larger tonnage and resulting in overcapacity.

Reading through the carrier’s 220-page annual report, it is difficult to see any reason for optimism among Hapag-Lloyd’s shareholders in 2014 – particularly when they read the Risk and Opportunity Report section.

It says: “Some of the competitors are larger than Hapag-Lloyd in respect of business volume, fleet size, transport volume and capacities. Others have better capital resources. This means that these competitors can be better positioned on the market to achieve economies of scale and are able to invest in more efficient vessels.”

Hapag-Lloyd has done what it can to match the economy of scale advantages of some of its competitors by ordering ten 13,200teu ships – the final three of this series being about to be deployed on Asia-Europe – but the finance requirement has spiked its year-on-year debt from €1.8bn to €2.47bn, and its gearing to 84.7% from the previous year’s 58.2%.

Indeed, according to the 2014 Container Shipping Outlook from financial analyst AlixPartners, Hapag-Lloyd and its peers’ investment in ultra-large, economy-of-scale containerships is “both the cause and the effect” of the financial pressure the carriers now find themselves under.

Meanwhile, after its failed courtship with compatriot Hamburg Sud, Hapag-Lloyd is now in the midst of due diligence in its acquisition of the container assets of CSAV – which the Chilean carrier prefers to call a merger.

Hapag-Lloyd said the proposed “takeover” of CSAV – which would result in CSAV taking a 30% stake in the larger group – would propel it from sixth to the fourth largest ocean carrier, “bringing us within striking distance of the three largest shipping companies”, and making it the market leader in South America.

Nevertheless, assuming the deal goes through, there will be much work to do to achieve the cost-saving synergies needed to turn a profit for the new combined entity, given that CSAV is also loss-making: it posted a $169m loss for 2013.

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