Hapag-Lloyd expects container demand growth to slow down in the second half of 2025 as more companies take a “wait-and-see” approach to the impact of tariffs.
Since the U.S. and China agreed to extend their Aug. 12 trade negotiation deadline for another 90 days, Hapag-Lloyd has seen “somewhat stronger” bookings from Asia to the U.S., particularly out of China, according to CEO Rolf Habben Jansen.
“How much of mini-rush that is, I think that remains to be seen,” Habben Jansen said. Despite the tariffs slowing down bookings at several points during the second quarter, cargo volumes increased 12.4 percent to 3,440,000 TEUs transported.
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In the second half, Hapag-Lloyd expects volumes to “increase moderately,” but the CEO said the company anticipates growing “significantly” ahead of the wider container shipping market at the end of the year.
Revenue for the Germany-based ocean carrier increased 7.8 percent to $5.3 billion, but profits sank 34.5 percent to $306 million in the quarter.
The carrier narrowed its earnings guidance in the wake of the results. Hapag-Lloyd now expects to report full-year earnings before interest, tax, depreciation and amortization of between $2.9 billion and $4 billion. Earnings before interest and tax is forecast at $233.7 million to $1.3 billion euros, a slimmer range then the previous guidance of no earnings to $1.75 billion.
Amid the softer guide and market outlook, Hapag-Lloyd stock plummeted more than 8 percent in Thursday trading.
With the profit hit along with overall market volatility, the container shipping firm is planning to slash some spending.
Hapag-Lloyd is prepping to cut more than $1 billion in costs by 2026, largely driven by the company’s recent phase-in into the Gemini Cooperation vessel-sharing alliance with Maersk.
According to Habben Jansen, the transition cost a “three-digit-million-dollar figure,” suggesting more than $100 million in expenses.
Synergies and efficiency gains with the now overlapping Hapag-Lloyd-Maersk ocean freight network could save the company as much as $350 million to $400 million through 2026, he said.
Maersk CEO Vincent Clerc confirmed in an Aug. 7 earnings call that cost savings related to the Gemini phase-in were also “on track.” Clerc said Maersk would have more updates on its savings plan on the November call.
Costs extended beyond the Gemini transition, with total transport and terminal expenses having risen 16.2 percent to just under $4 billion in the quarter due to continued operational disruptions and congestion at ports, as well as the ongoing vessel rerouting resulting from the uncertain security situation in the Red Sea.
Unit costs bumped up 3 percent from the year prior to $1.1 billion, largely due to higher storage costs per container and increased expenses for inland transport. Those factors drove handling and haulage costs up 11 percent to $594 million.
Habben Jansen acknowledged that even with the cost savings plan in play, the company will not be able to bring unit costs back to pre-Covid levels due to several factors. These included inflation, the extended scope of the European Union Emissions Trading System to maritime transport, increased use of low-sulfur fuel and elevated shipbuilding prices.
“The base cost today for all of the liner companies is simply a lot higher than what it was pre-pandemic,” said Habben Jansen.
These costs will also keep freight rates above 2019 levels, he said.
“Anyone who believes that freight rates would go back to that level…it’s just not going to happen,” said Habben Jansen, who made the comments in an environment that has enduring consistently falling ocean spot rates since June.
Drewry’s World Container Index fell for the ninth straight week, falling 3.1 percent week over week to $2,350 per 40-foot container. Trans-Pacific rates declined as well, as rates on the Shanghai-to-Los Angeles trade lane fell 1.6 percent to $2,494 per container, while those travelling from Shanghai to New York declined 4.9 percent to $3,638 per container.
The Shanghai Containerized Freight Index (SCFI) declined 2 percent from last week to 1,460.19 across all trade lanes. The SCFI showed the opposite of the Drewry WCI, indicating a steeper rate decline on the Asia-to-West Coast route of 3.5 percent to $1,759 per 40-foot container. The Asia-to-East Coast voyage saw a 2.6 percent weekly dip to $2,769 on average.
The jury is still out on how the dip in freight rates will play out in the coming weeks, especially as some carriers reshuffle capacity deployments based on the U.S. port fees on Chinese ships set to go into effect Oct. 14.
Habben Jansen said the fees would have no impact on Hapag-Lloyd, and called the recent falling rates “quite normal” for this part of the year.
“Sometimes the peak season is ending a little bit early. It looks right now that we don’t see a very strong peak running up to the end of September, but you never know,” Habben Jansen said. “It’s not that a lot of capacity has been added or a lot of capacity has been removed.”
