The fifth-largest container shipping operator in the world has raised concerns about the unsustainable levels of global container shipping freight rates.
The CEO of German carrier Hapag Lloyd, Rolf Habben Jansen, has pointed out that certain spot rates are currently below cost, and he believes that this situation cannot persist in the long term.
Habben Jansen warns that when the industry becomes cash-negative, measures will be taken to adjust rates slightly above cost.
The container shipping industry has been grappling with a challenging situation, as reflected by the Shanghai containerised freight index, which reached its lowest point in the early second quarter, falling below $1 000 per twenty-foot equivalent unit (TEU).
Since then, the index has shown minimal movement.
Transport expenses have experienced a significant increase due to a combination of factors, including inflation, fuel price hikes, and rising labour costs.
During the first quarter of 2023, Hapag Lloyd's transport expenses rose by 3% compared to the previous year, amounting to $1 324 per TEU. Habben Jansen expects these expenses to eventually settle within a range of $1 250 to $1 750 per TEU.
However, even within this range, rates would still be 25% higher than the pre-pandemic levels, adding to the mounting challenges faced by the industry.
Despite the ongoing obstacles, Hapag Lloyd reaffirmed its full-year guidance for 2023 in May.
The company anticipates that its earnings before interest and taxes (EBIT) will fall within a range of 2-4 billion euros. As the industry navigates through these turbulent times, Hapag Lloyd remains determined to adapt to the evolving market conditions and continue its operations, news agency Reuters reported.
