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The Red Sea effect: Hapag-Lloyd expects 2024 decreased earnings

The Red Sea effect: Hapag-Lloyd expects 2024 decreased earnings
The Red Sea effect: Hapag-Lloyd expects 2024 decreased earnings

The ongoing Red Sea crisis is still coming in waves for logistics and shipping specialists globally. Shipping company Hapag-Lloyd recently released its annual report, also announcing its financial forecast for the current financial year. 

The company recorded a decrease in earnings in 2023, something it expected. 

CEO of Hapag-Lloyd AG Rolf Habben Jansen says: “We have got the current financial year off to a satisfactory start, but the economic and political environment continues to be volatile and challenging – especially in view of the current situation around the Red Sea. We therefore expect to see an overall decrease in earnings in 2024.” 

Digitization of container fleet 

However, the 2023 results were not all bleak for the company. “We achieved the third-best group profit in the history of our company – even if it is significantly lower than it was in the exceptionally strong year 2022 due to the normalization of global supply chains. We were able to considerably boost customer satisfaction and the digitalization of our container fleet,” says Jansen. 

Some highlights from Hapag-Lloyd’s 2023 financials: 

  • Group EBITDA stood at USD 4.8 billion (EUR 4.5 billion). 
  • The Group EBIT experienced a year-on-year decrease to US$2.7 billion, and the Group profit to US$ 3.2 billion. 

The importance of the Red Sea in logistics 

The Red Sea is a crucial corridor connecting the Mediterranean Sea, Indian Ocean and beyond. Its strategic location gives shippers access to Europe, Asia, and Africa. The Red Sea route is the natural sailing route between these regions. 

This vital route being affected has hampered doing business for many companies. Locate2u reported previously that the British Chamber of Commerce (BCC) released a report saying almost 37% of companies surveyed in the report say they have been impacted by the Red Sea crisis. 

There is some light at the end of the tunnel though. French shipping and logistics company CMA CGM announced this month it has reevaluated the situation in the southern parts of the Red Sea and the company will now resume transits on a case-by-case basis. 

Global supply chain market 

Grand View Research reports the global supply chain management market is estimated to grow at an annual compounded growth rate 11.2% in the next six years. “The growth of the supply chain management (SCM) market can be attributed to the rising demand and increased awareness of the benefits of SCM solutions, such as transportation management systems, planning & analytics, forecasting accuracy, warehouse & inventory management, supply chain optimization, procurement & sourcing, waste minimization, manufacturing execution and relevant synthesis of business data.”

The report adds that North America accounted for the major market revenue share of 39.2% in 2023 and is estimated to dominate the market in the next six years. “The presence of a huge number of adopters of such software in the region and the fact that the region is advancing technologically contribute to the market growth,” reads the report. 

Now Read: Eco-digital shipping: Australia-Singapore partnership sets sail

About the author

Sharl is a qualified journalist. He has over 10 years’ experience in the media industry, including positions as an editor of a magazine and Business Editor of a daily newspaper. Sharl also has experience in logistics specifically operations, where he worked with global food aid organisations distributing food into Africa. Sharl enjoys writing business stories and human interest pieces.

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