Hapag-Lloyd, the world’s sixth-largest container carrier, is set to move from financial intensive care into operational convalescence. According to Hapag-Lloyd insiders, the shipping line moved out of the red toward the end of 2009 on the back of rising cargo volume and firming freight rates

— especially in its key Asia-Europe trades — that signal container shipping is emerging from its deepest-ever recession.

The
German carrier will again be a drag on TUI, its largest shareholder,
when the tourism giant on Feb. 15 publishes its results for the final
quarter of 2009. Hapag-Lloyd’s $1 billion-plus full-year loss —
following a $985 million deficit in the first nine months of 2009 —
will be the big news. But more important will be confirmation the
carrier was breaking even at the operational level in the final weeks
of the year.

Hapag-Lloyd isn’t about to start making serious money
again or paying a dividend to its shareholders. But there are signs the
carrier is better placed than many of its rivals to take advantage of
the container shipping recovery.

Hapag-Lloyd’s shareholders — TUI,
which holds 43.3 percent, and the Hamburg-based Albert Ballin
consortium, with a 56.7 percent share — are finally seeing results from
their $2.7 billion capital injection; the carrier has become a leaner
and fitter company.

Hapag-Lloyd has trimmed its headcount, reduced
its payroll, frozen recruitment, streamlined its regional offices and
restructured liner services as part of a plan to cut $1 billion in
costs annually. It also has cajoled shipowners, many of them German, to
reduce ship charter rates — a major cost item because 58 of its 117
vessels are hired, accounting for more than 45 percent of its total
fleet capacity.

And unlike many of its rivals, Hapag-Lloyd isn’t
weighed down by a huge order book of giant ships. It has just 11
vessels — with combined capacity of 96,250 TEUs — on order, equal to
19.6 percent of its current capacity, according to AXS-Alphaliner, the
Paris-based shipping analyst and consultant.

France’s financially
troubled CMA CGM, by contrast, has an orderbook equivalent to 47.5
percent of its current capacity and is spending valuable management
time struggling to cancel a third of its contracts with South Korean
shipyards.

Hapag-Lloyd’s lean orderbook ensures it won’t be burdened
by surplus capacity if global container trade increases only modestly
over the next couple of years. And if traffic rises more sharply than
forecast, the carrier can easily charter additional capacity at
favorable rates.

The carrier appeared to be facing fresh financial
problems in late January with reports European Union competition
regulators are challenging $1.7 billion in loan guarantees provided
late last year by the German government and the city-state of Hamburg.
The reports, however, aren’t likely to have caused much concern at
Hapag-Lloyd because the carrier only expected to tap the funds in a
dire emergency.

The more relaxed and optimistic stance of
Klaus-Michael Kuehne, the billionaire majority owner of Swiss global
logistics giant Kuehne + Nagel and second-largest shareholder in the
Albert Ballin consortium, offers further evidence that Hapag-Lloyd has
turned the corner.

Kuehne called on TUI in mid-January to sell its
Hapag-Lloyd stake to make room for new investors and a more stable mix
of shareholders. Kuehne is “bothered” by the current group of
shareholders — spanning tourism, insurance, banking and public
authorities — because their interests are too different.

In a vote
of confidence in the carrier, Kuehne said he wants to increase his
stake if new investors come on board. Kuehne hasn’t always seen
eye-to-eye with his fellow shareholders, but in the absence of comments
from TUI and the Albert Ballin consortium, his public statements — and
his knowledge of the global transport business — are a handy guide to
the company’s state of health.

TUI wants to cut free from
Hapag-Lloyd to focus on its core tourism business, but that won’t
happen any time soon. In fact, TUI has the right to convert $500
million of a $1 billion hybrid capital injection in October into
Hapag-Lloyd stock from 2011, which would lift its shareholding to 49.9
percent.

For now, Hapag-Lloyd itself is focused on returning to the
black and preparing for the looming consolidation of a container
shipping business that remains fragmented despite several major mergers.

With
a paltry 3.6 percent world market share, even a profitable Hapag-Lloyd
will struggle to survive, and is seen as an eager participant when
merger activity revives.

Source: Journal of Commerce

Search to find what you want

• Kuehne nail Chairman Wants To Raise use in Hapag-Lloyd

    Kuehne & Nagel International AG’s executive chairman and majority owner Klaus-Michael Kuehne said he is interested in raising his private stake in Hapag-Lloyd AG.

• No gain for Hapag in 2010 – Kuehne

    Roubled German shipping line Hapag – Lloyd will not return to profitability for another year according one of the major shareholders.

• Hapag-Lloyd Kuehne Investor urges tie-up

     Klaus-Michael Kuehne, shareholder in Hapag-Lloyd, is pushing for a tie-up of the German container shipping company with peers in Europe or Asia to secure Hapag-Lloyd’s long-term survival.  Kuehne, one of the biggest shareholders in a consortium that bought a 57 percent stake in Hapag-Lloyd from German tourism group TUI AG earlier this

• EU challenges Hapag-Lloyd loan

    European Union regulators are challenging the German government’s $1.7 billion loan guarantees to Hapag-Lloyd, the country’s biggest ocean container carrier, which narrowly avoided a loss in the fourth quarter.

• Hapag-Lloyd slashes quarterly loss

    Hapag-Lloyd, Germany’s largest ocean container carrier, drastically reduced losses in the final three months of the year on substantial freight rate increases on some routes but is forecast to remain in the red through 2010. Operating losses widened to $29 million in the three months to end-December from $11.4 million

• TUI board rebuffs Fredriksen Bid

    Hapag-Lloyd co-owner TUI on Monday rejected the latest bid by its biggest shareholder John Fredriksen, the Norwegian shipping tycoon, for a seat on the TUI supervisory board. TUI said the board unanimously nominated Klaus Mangold as a successor to supervisory board member Juergen Krumnow, who had previously announced he was

• Hapag-Lloyd announces the general increase effective 15 February 2010

    Please be advised that effective February 15, 2010, Hapag-Lloyd will increase rates for all commodities (Dry Containers) for cargo from the U.S.A. to East Asia follows: • USD 100/40ft (USD 80/20ft) for Long Beach, CA and Los Angeles, CA origins
• USD 150/40ft (USD 120/20ft) for all other origins East Asia

• Hapag-Lloyd may EU300 million credit, Ahrons Says

     Hapag-Lloyd AG, Germany’s largest container-shipping line, will get an emergency credit of 300 million euros ($429 million) provided all its shareholders agree, a lawmaker said.  The cash injection will be part of a 1.75 billion-euro rescue package by lenders and shareholders including TUI AG to secure Hapag-Lloyd’s long-term viability, Barbara Ahrons, a

• Hapag-Lloyd owner prepared to the lifeline

    The owners of Hapag-Lloyd are preparing to give the container shipping company further 420 million euros ($595.9 million), several people familiar with the situation told Reuters. “It is still undecided whether TUI will inject further cash or transform existing loans to Hapag into equity,” said a source close to TUI. The latter

• CMA CGM, Maruba and Hapag-Lloyd South combine services

    CMA CGM, Maruba and Hapag-Lloyd are collaborating in a regular weekly service between Northern Europe and the east coast of South America. Read at CMA CGM, Maruba and Hapag-Lloyd combine South America services

• Connect to CMA CGM, Hapag-Lloyd Maruba and South America Services

    CMA CGM, Maruba and Hapag-Lloyd are collaborating in a regular weekly service between Northern Europe and the east coast of South America. Read at CMA CGM, Maruba and Hapag-Lloyd combine South America services

• TUI Falls as the FT reports Germany Hapag may not get state aid

    TUI AG, the biggest stakeholder in the Hapag-Lloyd shipping line, fell the most in two weeks in German trading after Financial Times Deutschland said Hapag’s bid for state aid may be derailed by the European Union. Hapag wants loan guarantees worth 1.2 billion euros ($1.76 billion) from Germany’s federal government, an

• Hapag-Lloyd to gain 923 million-euro cash injection

    German shipping line Hapag-Lloyd AG may receive a 923 million-euro ($1.32 billion) cash injection from owners including the city of Hamburg as the company seeks to bolster its chances of receiving a federal loan guarantee. The capital increase approved today by the city’s government is more than the 750 million euros

• APL and Hapag Lloyd rebuilding joint Asia-Mexico service

    APL and Hapag-Lloyd have amended their joint Asia-Mexico service by switching from the present SAX loop to the PS2 loop, according to an AXS-Alphaliner weekly newsletter. It said the move corresponds to a change in the Asian range coverage of the joint service. The PS2 service then turns in six weeks

• Hapag-Lloyd India to raise prices

    Hapag-Lloyd in April will seek rate increases on two trade lanes affecting the Indian Subcontinent. A rate increase on the westbound trades from the Indian Subcontinent to Europe will be $200 per 20-foot equivalent unit, effective April 1. The rate increase will apply to all cargo moving from India, Pakistan,