GERMAN container shipper Hapag-Lloyd on Thursday (Mar 14) said global vessel oversupply and a crisis in the Red Sea will force it to cut expenses in 2024, including adapting sailings and ports, after it posted an 83 per cent fall in annual net profit.

“We expect the market environment to continue to be difficult given the large number of ship deliveries this year,” said chief executive Rolf Habben Jansen, adding that attacks on shipping in the Red Sea were disrupting its service network.

“We need to further reduce our per-unit costs in order to remain profitable and competitive, going forward,” he said.

The company, the world’s fifth-biggest container liner with 266 ships, will save on the procurement side and adjust services, he added.

In a call with reporters, Habben Jansen said this could include faster sailings, changes to departure and delivery ports, and operational efficiencies. A collaboration with competitor Maersk, which kicks in in February 2025, would help, he said.

Asked whether adjustments meant cuts to sailings, Habben Jansen said the Red Sea crisis had enforced route changes.

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“It can mean that we reduce services, it can mean that we bring additional services in,” he said. “Our teams did quite well around the Red Sea crisis.”

Hapag-Lloyd in January introduced land corridors through Saudi Arabia to mitigate the impact on its business from Jebel Ali, Dammam and Juibail to its ocean shuttle service out of Jeddah.

The company posted a net profit of 3 billion euros (S$4.4 billion) for 2023, down from 17 billion a year earlier, and cut its dividend by to 9.25 euros per share from 63 euros.

Hapag-Lloyd is among a number of commercial shippers that have been skipping the Suez Canal after Yemen-based Houthi militants began attacking ships, rerouting via the Cape of Good Hope, which adds two to three weeks to voyages.

German shipowners’ group VDR on Tuesday said the diversions cost operators US$1 million per tour.

Global fleet growth by perhaps between seven and 10 per cent this year would also add supply pressure, company data showed.

Earnings before interest and taxes (Ebit) this year will likely be between minus 1 billion euros to 1 billion euros, after 2.5 billion euros in 2023, Hapag-Lloyd forecasts.

Its shares in a small free float were down 1.9 per cent at 131.8 euros at 1145 GMT. REUTERS