German container shipping company Hapag-Lloyd reported profits this year through September were almost 80 percent below those of last year over the same period, falling to €3.2 billion. The company also cut its 2023 financial guidance.

The firm’s average freight rate for a 20-foot container was $1,312 in this year’s third quarter, compared to $3,106 a year earlier. However, costs are now 30 percent higher than in 2019, the company said.

Freight rates “are not covering the cost of moving boxes from Asia to Europe,” CEO Rolf Jansen said in a statement announcing the quarterly results, adding that current rates are “very unsustainable.”

“If spot rates do not recover, we could be facing some challenging quarters in this subdued market environment,” he said.

Third-quarter earnings plummeted by 95 percent, year over year. 

The shipping company received more bad news last week: the Panama Canal is reducing the number of ships it can handle due to a drought that “threatened” the canal’s ability to function, the Financial Times said.

The canal is expected to cut the number of ships allowed through by as much as 40 percent, Jansen said. Hapag-Lloyd will reroute some ships through the Suez Canal. 

TRENDPOST: Hapag-Lloyd is not the first shipper to see revenues and profits pucker.

AP Moller Maersk reported this year’s first quarter revenue was down 25 percent and profits for the period shrank by two-thirds, as we reported in “Maersk Profits Sink on Global Slowdown” (9 May 2023). Its third-quarter revenues were halved, year on year, and the company is cutting 10,000 people out of its workforce this year.

Shipping companies’ freight rates and profits are bellwethers of the global economy’s fortunes. The serious drop in the companies’ third-quarter financials support predictions of thin holiday sales, which would bring a recession in the U.S. and Europe closer.