Hapag-Lloyd says Q4 market condition better than expected, upgrades earnings

Houston — German container carrier Hapag-Lloyd upgraded its Q4 2020 earnings projection on Dec. 8 after demand for container trade remained strong and freight rates continued to rise on major tradelanes through the final months of 2020.

The company now expects an EBITDA of Eur2.6 billion-Eur2.7 billion, up from Eur2.4 billion-Eur2.6 billion previously stated in October 2020.

"Market demand for container capacities has continued to be surprisingly strong and today we are deploying every available ship," said CEO Rolf Habben Jansen, speaking on Q4 market conditions.

The company had said in its Nov. 13 Q3 earnings call that equipment issues throughout Asia were the primary limiting factors to growth in Q4 2020.

And equipment issues have grown throughout the fourth quarter, as container shortages and port congestion are no longer localized to the Asia market, but are now felt throughout North America and Europe. But as year end demand for containerized goods has remained unusually strong, freight rates have continued to rise on many routes, in spite of the fact that the year-end peak season typically comes to a close in October.

"We can have space, but no equipment to fill it" said one North American carrier source speaking on the lack of available containers throughout Asia.

At $3,900/FEU, the cost to ship from North Asia to West Coast North America is now near triple what it was at the start of 2020, when S&P Global Platts assessed it at $1,350/FEU, but has remained steady since mid-September. For goods flowing from North Asia to East Coast North America, rates have also jumped, climbing to $4,800/FEU on Dec. 8.

S&P recently upgraded Hapag-Lloyd's credit rating to "BB-" from "B+" with a positive outlook.

Hapag-Lloyd has a fleet of 234 ships and a capacity of 1.7 million TEUs.