The Hamburg, Germany-based shipping company intends to order six mega vessels, each capable of loading up to 23,000 TEU, thereby doubling the existing fleet of six large container ships
currently transporting up to 19,000 TEU each. The order will be placed this year or 2021, although no decisions have yet been made, CEO Rolf Habben Jansen stated at a press meeting attended by 25
trade journalists in the hometown of his company.
Further to this, he announced that due to stricter and costlier environmental regulations, H-L will pass the increase in sailing costs onto its customers.
“Our current fleet of 230 container ships encompasses a broad mix of large, medium-sized, and smaller vessels,” the H-L helmsman stated. Given the rather sluggish market conditions, this
capacity currently suffices to meet customer demand. From 2022 onwards, however, some mid-sized units will need to be replaced by new vessels due to cost and age reasons, he said.
In view of this upcoming scrapping process, the management has basically decided to keep the fleet’s transport capacity at the same level mas o menos by deploying additional six mega container ships, capable of transporting either 22,000 or 23,000 steel boxes each. This order, although not inked yet, is a precondition to offer the market a weekly sailing service between Europe and Asia, Mr Habben Jansen reasoned.
Quality comes first
Whether the new vessels will be powered by LNG or low-sulphur fuel is still an open issue. However, the CEO indicated his preference for the gas solution should the cost difference be in the range of 10 million US$ annually. “25 million would be too much,” he declared. The same applies to the conversion of other ships that still run on heavy fuel oil and in which scrubbers could be fitted.
This is all the more relevant since the shipping line is pushing transport and service quality as a main market differentiator up front, and that will cost additional money during the implementation phase. Until December 2020, H-L will successively publish 10 quality promises, thus creating full transparency for their customers, demonstrating the shipping line’s engagement.
The management intends to announce the first three commitments in January or February. Mr Habben Jansen remained tight-lipped as to what these will be.
Pressure on profits expected
In 2020, Hapag-Lloyd expects moderate growth with tonnage increasing by 1.5% year-on-year. Yet, this tentative upswing will not lead to higher earnings, warned the executive. Instead, stricter environmental regulations which came into force on January 1st, 2020, will substantially impact the shipping line’s profits, he predicted. The switch from heavy fuel oil to low-sulphur fuel, or – preferentially, LNG – which has been mandatory since January 1st, 2020, will lead to substantial extra costs with political and economic upheavals putting further pressure on the margin.
Eying Africa and India
These external circumstances translate into additional yearly expenditures of one billion US$, Habben Jansen declared. As a matter of fact, all shipping lines are in one way or another forced for economic reasons to pass the cost hike caused by environmental requirements on to their customers. In the case of H-L, the CEO expects mounting financial pressure at least during the first two quarters. Having said this, he then became more optimistic, emphasizing that H-L increasingly focuses on underserved markets such as Africa and India. “That’s where future growth takes place, so we better set the course to strengthen our presence in these markets.”
The shipping line will publish its 2019 results on March 20, 2020.
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