Hapag-Lloyd Raises Outlook on Stronger-than-expected Demand

International shipping company Hapag-Lloyd raised its full-year earnings guidance on Thursday citing stronger-than-expected demand and higher freight rates.

Despite increased expenses from the diversion of vessels around the Cape of Good Hope, Hapag-Lloyd says it now expects earnings before interest, taxes, depreciation, and amortisation (EBITDA) for 2024 of between $4.6 billion and $5 billion, up from previous guidance of $3.5 billion to $4.6 billion.

However, given very volatile freight rates and major geopolitical challenges, the forecast is subject to a high degree of uncertainty, Hapag-Lloyd said.

Attacks on international shipping in the Red Sea by Iran-aligned Houthi militants in Yemen since late last year have forced shipping companies to reroute traffic away from the Suez Canal to the longer route around Africa.

"The transport times are much longer, which is why we needed significantly more capacity and bought capacity. Despite this, demand was relatively high and capacity was scarce or is still scarce," a spokesperson for Hapag-Lloyd told Reuters.

"When capacity is relatively tight, rates simply go up. This was particularly the case on the Far East to Europe route," the spokesperson added.

The company, which specializes in global container liner shipping, also announced preliminary earnings before interest, taxation, depreciation and amortization of about $3.6 billion for the first nine months of the year, down from $4.5 billion a year earlier.

Final results are due to be published on Nov. 14.

(Reuters - Reporting by Marleen Kaesebier; editing by Miranda Murray and Jason Neely)