News / Hapag-Lloyd expects recovery in Q3, but short-term prospects are uncertain

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Hapag-Lloyd expects a “solid recovery” for all of its liner trades this year and into 2021, but short-term, the outlook is uncertain, it said today.

“One can only speculate on where we are going to be in four or eight weeks from today,” said chief executive Rolf Habben Jansen this morning.

“Q1 was mainly effected by what happened in China, but since March it is very clear that other regions, like Europe and the US, but increasingly other places like Latin America and India, have been heavily impacted.

“If you look at what’s happening, we would still expect to see a recovery probably going to start in the course of the third quarter, and then we would expect that to continue into 2021,” said Mr Habben Jansen.

He said a recent Clarksons forecast of a circa-11% downgrade for global container volumes this year was “as accurate a prediction as is currently available”. But he added there were “important differences” to the 2008/09 financial crisis, when there was a similar demand decline.

He noted that the orderbook in 2008 was equivalent to around half of the global fleet – a large number of new ships stemmed to be delivered during the crisis – resulting in a massive imbalance of supply and demand.

“Today that situation is materially different,” said Mr Habben Jansen. “The orderbook is pretty much at a record low and I would be very surprised if we saw any orders coming any time soon. If anything, that should help to prevent a catastrophic situation.”

Indeed the German carrier “will wait until the situation settles down” before continuing with its planned order for 23,000 teu ULCVs.

Mr Habben Jansen said Hapag-Lloyd holds a crisis committee meeting every other day “to ensure we stay on top of what is needed, and when required we take additional measures”.

He explained: “We have to adjust capacity to match demand, simply to control costs. On the other hand, we have to invest in certain places and that means we have hired a significant amount of equipment, in Asia, in Europe and, to a lesser extent, in the US, to make sure we have sufficient availability of boxes, as the flows today are quite disrupted.”

He added it was “too early to tell” whether trade flows would change post-crisis, but agreed “there will be some commodities where things will change” and that “people may want to reconsider a single sourcing strategy and opt for it being a little bit broader”, adding: “We will need to adjust to them.”

On the group’s financial position, Mr Habben Jansen said: “We have secured additional liquidity in case we need it, but that is not foreseeable at this point of time…. and when you look at our overall balance sheet, it’s quite healthy.”

This may not be the case with some of Hapag-Lloyd’s peers. Mr Habben Jansen told The Wall Street Journal this week that, as long as the recovery started in the third quarter, he believed “all the top ten liners will be standing at the end of the year”.

“If it’s going to take longer, then it may become more difficult for some to survive,” he told the WSJ.

Hapag-Lloyd will publish its first-quarter results on 15 May.