German shipping giant remains slightly positive despite corona crisis

The COVID-19 pandemic seems to have shattered the ability of analysts to predict the outlook for the global economy putting a veil of uncertainty on different market prospects including shipping.

Predictions are being revised downwards ever more frequently as new metrics and factors are being considered as they emerge.

One thing is definitely certain, it is likely to get worse before it gets better. Even the IMF believes that the Great Lockdown is set to bring worse times for the global economy than the Great Depression.

11% decline in 2020

Clarksons recently downgraded its forecast for the container shipping industry for 2020, announcing a decline of around 11 percent.

Numerous parallels are being made between 2020 and the 2008 economic crisis, however, analysts disagree on the mode of the recovery, which is not expected to be V-shaped this time around.

When it comes to comparing 2020 with the scenario the container shipping market was faced with back in 2008 and 2009, one crucial factor is completely different.

The order book for container shipping in 2008 accounted for 50 percent of the global fleet which considerably hampered the recovery of the sector post-economic crisis, CEO of the German container shipping company Hapag-Lloyd Rolf Habben Jansen said in a press briefing this morning.

The tremendous amount of ships coming into the fleet aggravated the supply and demand balance prolonging the recovery tempo of the sector.

The situation today is materially different, Jansen pointed out, as the order book currently stands at a record low level with 0.2 percent of the world fleet.

Low order book combined with little to no incentive to order new ships at the moment should balance out the demand-supply situation and provide relief in the expected recovery.

A high level of idle fleet due to drydocking and scrubber retrofits should also provide some ease.

As such, Jansen expects to see a recovery for the market starting in the third quarter of this year and moving into 2021.

“Well positioned to weather the storm”

The German liner giant said that it has secured additional liquidity just in case it might need it, stressing that the company has a healthy cash balance at the moment and a solid balance sheet.

“We are well-positioned to weather the storm,” Jansen said.

The company has no plans to cut the number of its employees at the time being, but, this might change if the situation turns for the worse.

Like its numerous counterparts, Hapag-Lloyd has been cutting costs where possible through capacity adjustments and blanking of sailings, cutting between 15 and 20 percent of its capacity.

Furthermore, all non-essential investments, including ordering of new ships are being reconsidered and delayed.