Hapag-Lloyd expects continued industry boom

Hapag-Lloyd expects continued industry boom    Senior executives of Hapag-Lloyd said they expect at least another year of strong market conditions in container shipping, with supply and demand remaining in balance possibly through 2007 and the likelihood of an industry downturn receding.
   There is “no risk” of a market downturn this year, Michael Behrendt, chairman of Hapag-Lloyd, told a press conference Tuesday in Hamburg. “In 2006, we will not see a major change — maybe a minor dip.”
   Adolf Adrion, chief executive officer of Hapag-Lloyd Container Line, expects global cargo volumes to rise more than 10 percent this year, with traffic increases of about 13 percent on the east/west routes. This would be in line with predicted ship capacity growth, he said.
   Hapag-Lloyd also cited independent forecasts that global container traffic will rise 8 percent this year whereas ship capacity would expand 9 percent.
   The carrier expects freight rates to be constant or up slightly this year, after average increases of 8 percent during 2004.
   “As far as 2005 is concerned, I have no doubt that it will be the same situation as in 2004,” Adrion said.
   This would not be a bad thing for the German shipping group, which described 2004 as “the best year ever for the container shipping industry.”
   Hapag-Lloyd Container Line increased its operating profit (earnings before interest and tax) 11 percent to 290 million euros ($394 million) in 2004, from 262 million euros in 2003. Last year, its revenue rose 13 percent in local currency to 2.56 billion euros ($3.5 billion) from 2.26 billion euros, despite the depreciation of the U.S. dollar, in which most freight rates are priced.
   The carrier’s operating profit margin as a percentage of revenue was 11.3 percent last year, down slightly from the 11.6-percent margin in 2003.
   Hapag-Lloyd played down the potential negative impact of the large orderbook of new boxships due to be delivered in the next three to four years, which accounts for about 45 percent of the current fleet.
   “We think in 2006 we’ll need the tonnage,” Behrendt said. In that year, there may be a small surplus of capacity for a while, but “not a catastrophe.”
   Adrion believes cargo growth in 2007 would absorb any surplus capacity that may arise at the end of 2006.
   Behrendt said independent industry forecasters have consistently underestimated cargo growth and often issued gloomy scenarios of overcapacity that never materialized.
   “Even assuming a conservative forecast of future growth rates, a substantial surplus of tonnage is hardly expected in 2006, despite the capacities coming on to the market,” he added.