The Germany-based container shipping company Hamburg Süd said it did well in 2013 “under difficult business conditions," and said it does not foresee a sustained recovery in 2014.
Part of Germany’s privately-held Dr. Oetker conglomerate, Hamburg Süd said it saw “subdued market growth and operational problems in the vastly overstretched ports in Brazil” last year.
Hamburg Süd and its Brazilian subsidiary Aliança moved 3.3 million TEUs in 2013, a 1 percent increase over 2012.
The company said with freight rates falling slightly and devaluation of the U.S. dollar by around 4 percent against the euro, total shipping revenues fell by 3.9 percent to €5.3 billion ($7.3 billion).
“Once again, available global slot capacity outpaced container transport volume as deliveries continue to exceed the level of scrappage, which also increased. As a consequence of the continuing overcapacity, freight rates in most trades remained under pressure or declined still further. The only positive support came from fuel prices, which have fallen slightly from the highest level of the previous year,” the company said.
Hamburg Süd said at the end of the year, its fleet was made up of 154 ships, 45 of which were owned by the group. Of those, 103 were employed in liner services, and 51 were employed in tramp operations.
The available slot capacity in liner services increased by around 6 percent to about 457,000 TEUs in 2013, and the average ship capacity by 7 percent to 4,437 TEUs.
During 2013, the company added the first four in a series of 9,600-TEU ships, the largest container ships ever in the Hamburg Süd fleet. The ships have 2,100 reefer slots on board, making them the world’s largest reefer capacity vessels. The new ships were introduced into the services between Asia or Europe and the East Coast of South America.
Aliança also introduced four 3,800-TEU ships in the Brazilian cabotage service, saying they "set new standards for cost efficiency on the South American East Coast.”
Reviewing its 2013 performance, Hamburg Süd said, “Against a background of a strong recovery in freight rates in the worldwide transportation of refrigerated goods, liner services had a much better start than in the previous year.”
“Due to unsatisfactory volume growth and overcapacity in the Asian services in 2013, earnings were under considerable pressure during the rest of the year. The growth in carryings was weaker than expected; strikes in Chile at the beginning of the year, overloaded infrastructure in Brazilian ports, and political and economic problems in Venezuela and in Mediterranean countries had a negative impact on cargo operations.”
It said its service between Europe and India/Pakistan “suffered a rather dramatic fall in rates from time to time” and “was particularly disappointing.”
Overall, Hamburg Süd said, it was able to post a slight year-over-year improvement in results from liner services, “although due to rate pressure in the Asia-South America services, the still unsatisfactory development of activities in the Mediterranean and the service between Europe and India/Pakistan, none of our targets with respect to overall earnings have been met.”
In addition to its container business, Hamburg Süd’s Rudolf A. Oetker unit operates dry bulk carriers and product tankers.
The company noted that in 2013, “worldwide bulk shipping was still marked by substantial overcapacity and transport volumes -- particularly to China -- falling below expectations, even if there was an apparent improvement towards the end of the year. Overall, Hamburg Süd’s bulk business and product tanker business failed to generate positive results last year.”
The company noted that, “Despite the unsatisfactory business environment, investments totaling €450 million were considerably above the level of the previous year (€247 million). These investments mainly comprise installments and final payments for 12 9,000/9,600-TEU ships and four smaller 3,800-TEU newbuilds.”
On the outlook for 2014, Hamburg Süd said, “Even if the overall positive outlook as regards the growth of the world economy and trade should turn out to be correct, we do not yet expect a sustained recovery of container liner services over the next year.
“This is mainly due to continuing increases in overcapacity. Although many liner ship owners and the German ship-owning companies that are so traditionally prevalent in the container segment mostly remain highly indebted, the number of orders for new ships is rising again. Indirect government support from the large shipbuilding countries Korea and China, and private equity -- mainly from the USA -- are shoring up ship financing despite the failure of the German KG-company system.”
Hamburg Süd said it will “expand its activities in the core services to and from South America and add to its network where it makes sense. Based on a high owned share of modern ships and containers, the focus of corporate management in 2014 will remain a continual improvement of all cost positions.”
Hamburg Süd also said it is “preparing our fleet for the introduction of the increased requirements under MARPOL IV as regards reduction of emissions. This includes the use of low-sulphur fuels in coastal waters, and equipping our ships that operate on the US West Coast with facilities to receive shore-side electricity. Initially, the additional operational cost of Hamburg Süd will increase by at least $40 million per year. Due to the strong pressure on earnings and the overall less-than-satisfactory results, we will be forced to pass on these additional costs to shippers as surcharges.”