German container line Hamburg Süd described its 2.3 increase in cargo volumes in 2014 as ”modest,” attributing the less-than-expected improvement to the market overcapacity and a weak economic development of the carrier’s key markets in South America.
Hamburg Süd handled 3.375 million TEUs in 2014, but the increase in volumes did not turn into an increase in total sales, which fell by 1% to EUR 5.2 billion, due to falling freight rates and a weak US dollar, the carrier said in a report.
The weak economic development in Brazil, Argentina and Venezuela contributed to the low, and in some cases negative growth on the North-South trade lanes.
Freight rates came under high pressure due to the additional capacity from the medium-sized vessels displaced from the Asia trades.
The cascading into the North-South trades above all severely impacted the South America routes, causing an increase in tonnage capacity that could not be offset by the weak growth rates in carryings.
Although the carriers attempted to reduce capacity on the South America routes especially in the off-season, capacity utilisation of the ship systems for large parts of the year was too low. Due to the stagnating and partially declining imports in Brazil and Argentina, the development of activities between North and South America and from Asia to the South American East coast was especially disappointing.
Ongoing overcapacity contributed to the fact that the service between India/Pakistan and Asia as well as Northern Europe continued to post unsatisfactory results.
Looking ahead, with a rise in global container transports of around 5% and anticipated record growth in slot capacity of 8%, the overcapacity of container slots is continuing to increase in 2015. On the East-West trades this increase will focus on large ships with a capacity in excess of 10,000 TEU.
Positive effects for 2015 can be expected in the short term to continue to come from low fuel prices, which at least for the time being can offset the fall in freight revenues. However, the industry will see sustained earnings improvements only if strict cost and capacity management is accompanied by sustained discipline in terms of rates.
In bulk shipping, the market environment is likely to further deteriorate in 2015, with charter rates and time charter equivalents currently have reached all time low levels. Net fleet growth is forecast at around 5%. Unless China’s raw material imports increase substantially over the next few months, the growth in the volume of cargo will not be able to keep up with this figure, and Hamburg Süd’s tramp shipping activities would produce an even less satisfactory result than last year.
Given the relatively favourable trend in fuel prices and exchange rates, the Hamburg Süd shipping group is anticipating that operating results for 2015 will be higher than last year; however, this is to be seen against extraordinary expenses from the integration of the CCNI activities.