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Hapag-Lloyd is raising its profit forecast for 2024 for the second time, following in the footsteps of rival ocean carrier Maersk as the container shipping industry continues to benefit from elevated freight rates.
The German logistics giant said earnings before interest and taxes (EBIT) is now expected to range between $1.3 billion and $2.4 billion, up from the previous forecast between no profit and $1.1 billion. When excluding impacts from depreciation and amortization, EBITDA could be between $3.5 billion and $4.6 billion.
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Hapag-Lloyd’s expectations were less concrete in March, with the liner calculating anywhere between a potential EBIT loss of $1.1 billion to a potential $1.1 billion gain in EBIT.
“Against the backdrop of very volatile freight rates and major geopolitical challenges, the forecast is subject to a high degree of uncertainty,” Hapag-Lloyd said in a statement.
The freight rates have largely been attributed to the ongoing Houthi attacks on commercial vessels in the Red Sea, which have forced ocean carriers to mostly avoid the waterway altogether. As a result, container vessels have been rerouting around Africa’s Cape of Good Hope since December, leading to longer lead times for goods, more fuel burned and less overall freight capacity out on the oceans.
All of these factors have led to the escalation of freight rates, but other knock-on effects in the months after the mass diversions have further exacerbated the problem, especially since early May, when rates experienced a three-month decline from pre-Lunar New Year totals.
Congestion at major global ports including Singapore, Shanghai and Kelang in Malaysia has piled up dramatically, slowing the movement of goods and contributing to a shortage of empty containers—a primary headache for the world’s largest exporter: China. And in the U.S., there’s been stronger-than-expected demand as shippers rush to bring in more goods ahead of the peak shipping season.
According to data from the Drewry World Container Index (WCI), ocean spot freight rates measured across eight major trade lanes jumped 10 percent in one week to $5,868 per 40-foot container as of July 4. Since May 2, these rates have more than doubled at a rate of 117 percent. Going further back, the rates have skyrocketed a whopping 325 percent since Nov. 30, when they were $1,382 per container.