Hapag-Lloyd Aktien

Welcome everyone, and thank you for taking the time to join us here today. I'll probably start with a couple of highlights and a couple of things around the third quarter before Mark will take us through the financials. I think when we look at the first nine months of 2024, of course, there were probably two themes that dominated all the narrative. One of them was, of course, the Red Sea crisis, but I would also say that demand has been much stronger. than everyone expected, and I believe that's also one of the reasons why we saw a strong uptick in particularly short-term rates out of Asia in the course of the second and the third quarter. On the back of that, we delivered, which I would say is a very solid result with a group EBIT of 1.9 billion for the first nine months of 2024. That's also why we raised our earnings outlook in October when we also sent you the prelims for Q3. Two other things that are worthwhile mentioning is, of course, the launch of Gemini. A lot of work has been put into that by all of our teams around the globe, and I believe we're in a really good place today, as we will open for bookings in a couple of weeks from today. The network is finalized. I think we are preparing the transition, and hopefully everybody will be able to experience this, indeed, higher schedule reliability and even better service in the course of 25 years. Then we also announced a number of new ships that we bought. We did not buy ships for a while after we did that in 21 for the last time. And as such, I think it was logical that we ordered a number of ships in the 9 and 17K class to help us develop our business further, but also to replace a number of aging ships. If we look at the market, I think many of you know these graphs. Global container volume really quite strong this year, particularly in the beginning of the year, but still today pretty healthy growth. I would also say that after the October holidays, we saw bookings and volumes coming back quite quickly. So that's a positive read looking towards the end of the year. Overall volumes up about 6.3%. If we believe CTS, we are up close to 5%. slightly below market. Hopefully, we'll still be able to catch up some of that in the fourth quarter so that we are going to close the year with a growth which is going to be roundabout market. Particular TP, strong growth also at HAPAC. And of course, on the other hand, we also continue to cope with all kinds of operational disruptions, not only around the Cape of Good Hope, but also, for example, the short strike that we saw in on the US, the East Coast, and now over the last couple of days, for example, in Canada. When we look at Gemini, maybe a few words on that. We announced in October that we are going to, that we assume to start with a network that's going to go around the Cape of Good Hope. Bookings will start in December. That's when we will open up our systems for bookings on all those services. In the end, the network will consist of 57 services will deploy about 340 vessels between Hapag and Maersk, and we will make about 3.7 million TUs of capacity available. Network is alive, yeah, two weeks until we start booking in the beginning of, taking bookings in the beginning of December, and only 10 weeks to go until we start operations. That means we are entering into the hot phase. I think we're confident that we're going to be off to a good start But of course, always many things to do just before you make a change that is that big. Then before I hand it over to Mark, a few words on the ships that we ordered. We added about 300,000 TUs to our order book. Keep in mind that these ships will be delivered between 27 and 29, so it's definitely over a longer period. We call them new workhorses of close to 17,000 TUs, but also some versatile mid-sized vessels In total, an investment of, indeed, as was also mentioned in the press, close to $4 billion, for which we have secured, meantime, the financing needed for that. All of the ships, dual fuel with a high fuel flexibility. We believe, at this point in time, dual fuel RNG is probably the best option. We hope that, at some point, we can sell them on either biomethane or emethane. We also... have the option to retrofit them into ammonia if and when that would be required. But in fairness, that is not trivial if we would want to do that. And one of the things that's definitely very positive about the ships is that because they are so much more fuel efficient than the ships that they will likely replace, that also emissions will be significantly lower and that will help us to achieve the targets that we've set ourselves for 2030 and a little bit further out also in the direction of 2045. So with that, Mark, over to you.

Yes, thank you, Rolf, and good morning, everyone. Let me start with a quick recap of our key group figures. And as Rolf indicated, we are very pleased with the course of the business so far, which has exceeded our initial expectations. And as you know, although earnings for the first nine months of 2024 are below last year's exceptionally high levels, operational and financial performance showed a steady improvement throughout the year, and this progress was driven by strong contributions from both business segments. In addition, we succeed in generating robust pre-cash flow, once again, despite increased investments in fleet, in our fleet extension asset, and in our container asset base. The good earnings trend has not only funded our strategic initiatives, but also reinforced our liquidity, keeping us well positioned for future growth and stability. And let me now elaborate more in detail on the results on the next page. Group revenue in the first nine months of 24 was almost stable at 15.3 billion U.S., as lower freight rates were compensated by higher volumes. in the liner business and much higher revenues in our newly formed terminal business. At the same time, earnings in the first nine months of 24 are still down considerably. This is mainly the result of the higher cost in the liner business. However, the earnings trajectory this year is very different to the previous year. Earnings bottomed out in Q4-23, as we all know, and started to improve thereafter. And as a result of higher demand and improved freight rates, Group EBITDA increased quarter-on-quarter by 58% to $1.6 billion, and Group EBIT more than doubled to $1.1 billion for the single quarter. The annualized return on invested capital amounted to 13.1% in the first nine months of 2024, which is well above our cost of capital. On segment level, we can see that both businesses delivered strong earnings growth in Q3 2024, which was driven by, on the one hand side, higher volumes and by The pricing, liner shipping revenues increased close to 5.7 billion U.S. in Q4, in Q3, sorry, 24, while EBIT jumped over the billion U.S. dollar mark after 224 million the year before. And this represents a strong Q3 EBIT margin of 18.3%. In terminal infrastructure, Revenues also increased clearly in Q3, as well as in the first nine months of 24, which is mainly related to the acquisition of the SAM terminals in August 23, as we know. Segment EBITDA increased to $43 million in Q3 and $114 million in the first nine months of 24, which results in a solid margin of 35%. Segment EBIT amounted to $22 million in Q3 and $56 million in the first nine months, 24. And while profitability in this segment is moving in the right direction, I think it's good to remind us that this business is still in the process of being formed and built up. We have started already to realize the first synergies between both businesses and expect for sure more to come. However, I think it's important to mention here we also expect further ramp-up costs, which is why profitability levels may fluctuate from quarter to quarter a bit. Looking now at the main value drivers on the next slide, A slide for the liner shipping segment. After reporting out in Q4 23, the average trade rate increased gradually and stood at $1,467 per TU for the first nine months in 24, which is 9% below the last year. Trade rates improved on all routes out of Asia, while out of Europe to North and South America, they remained on a comparatively low level. At the same time, transport volumes in the first nine months of 24 increased by 5% to 9.3 million TU. Q3, 24 volumes of 3.2 million TU were the highest number in Hapag-Lloyd's history. While almost all trades saw an increase in demand, the strongest growth in transport volume was recorded on the Trans-Pacific, as already mentioned, where volumes grew by almost 20% in the first nine months, 24. On the other hand, the Middle East volumes were clearly affected by the tense security situation all around the Red Sea, resulting in 19% lower volumes. Now, jumping to the unit costs, they remained impacted by the necessary rerouting of our vessels around the Cape of Good Hope, but also operational disruptions in the ports around the world and stricter, for sure, environmental regulations which impacted us. While volumes were up 5% as set in the first nine months of 24, our total bunker consumption increased by more than 17% due to longer voyage distances. And in addition, bunker costs increased following the first-time inclusion of the shipping sector into the EU emission trading system at the start of this year. And with the planned increase of the EU ETS scope from 40 to 70% of relevant emissions on the first time application of EU regulation, these cost components will increase further in the next years. Handling and haulage increased due to higher transshipment activities and storage costs, which are related to longer dwelling times in the ports. Vessel and voyage costs declined mainly due to the lower US costs, and however, this was partially offset by higher expenses for short-term charter ships and container slot charter costs on third-party vessels if it couldn't be fully compensated. In total, unit costs in Q3 amounted to US$1,298 per TU. Now to our cash flow, operating cash flow for the first nine months of 24 was around 3.1 billion U.S. dollars, slightly impacted by negative working capital effects due to increased volumes and freight rates. Investments in our vessel and container fleets as well as our terminal portfolio led to a cash outflow of close to 1.8 billion U.S. dollars, And until the end of September, we received in total seven new-build vessels with a nominal capacity of around 135,000 TU, including one long-term charter, and one additional 24,000 TU vessel was delivered after the reporting period a few weeks ago already. In addition, we have ordered, as said by all, new container boxes, with a total capacity of 640,000 TUs to account for the increased turnaround times, higher volumes, and preparation for Gemini. Interest income dividends from our equity participation and divestments resulted in a cash inflow of $355 million U.S. dollars. And free cash flow was, again, clearly positive with $1,066,000,000. The cash position declined to $5.2 billion, mainly due to the distribution of dividends to our shareholders of $1.8 billion and to repayment of debt and lease liabilities of $0.9 billion. Regarding the announced order of 24 vessels, we expect to pay the first installment of around 400 million US dollars in Q4 24. And the next payment will not be due before the year 26. And installments will initially paid from our cash balance. And upon delivery, long-term financing will be drawn down, from which we have already received firm commitments from various financial institutions. As usual, I would like now to conclude with a review of our key balance sheet figures, which remain very solid and far above our financial targets. Net liquidity position is lower as compared to the year 2023, following the distribution of dividend and higher charter liabilities asset, but we still hold a substantial liquidity reserve of $8 billion. In addition, with $21 billion, the equity position and equity ratio are almost on the levels of year-end 2023. And having said that, I hand it back to Rolf for market update outlook and key priorities. Thank you.

Thank you, Mark. Yes, just maybe quickly from my side, a couple of things on supply and demand and active feed, because I believe it is interesting to look a bit at that. When we look at supply and demand, of course, on the one hand, it's about demand growth, but it's also about how far do we have to sail. And as such, I do think that the growth in TU miles is also relevant. And as you can see, that, of course, because of the reroutings a round of cake, good hope, has been, the growth in TU miles has been very steep this year. That's also the reason why we, in essence, need all the ships that we have available to deliver those goods to our customers, more or less on time. I think in hindsight, we can be happy that we all ordered a fair number of ships, because if that would not have been the case, we would have had a lot more disruption than we have seen in the course of 2024. As you can see, the inactive fleet still very, very low, also in a historical perspective. And of course, that also means that time charges remain fairly expensive. If we then switch to the order book, and please keep in mind the previous page, then we see that the order book is indeed at the moment at something like 26%, which is certainly not a small number. But we should also not forget that these deliveries are scheduled over quite a long period. In the past, we used to have an order book that covered two and a half to three years. Now you'll see that many of the orders that are in the book will only be delivered in 27, 28, and 29. And if you keep in mind the picture from the previous page, then I do believe that even if a fair number of ships will be delivered next year, that's a bit dependent on what your assumption is on whether we will go around the Cape of Good Hope or not. I think it's pretty clear that if we have to continue sailing around the Cape, we will also next year need pretty much all the ships that are available. And let us not forget that scrapping has been exceptionally low over the last 15 years, as you can see on the right-hand side. But as the number of ships that is becoming older than 25 years is steadily growing, I think it's a fair assumption to assume that until the end of this decade, something between 3 and 4.5 million to use will need to be scrapped. And if that's the case, that of course covers also quite a bit of the order book that we see at this point in time. So that means we see growth, net growth of the fleet that's probably not all that far from what we will see with demand growth. So I would say that that picture is actually not that unhealthy. In reality, we probably still need a few more ships as I expect that over time also to comply with the IMO rules, people will have to sail a little bit slower. Moving forward, you will have seen that we raised our earnings outlook to between 4.6 and 5 billion EBITDA, and in terms of EBIT, between 2.4 and 2.8 billion. We did that on the back of a fairly strong Q3, as Mark has just elaborated. And we also see that the decline in spot rates that we have seen since the peak mid-July has sort of stopped. And over the last three, four weeks, I would say rates have actually stabilized on a level that's actually not so different from what we saw after the first correction, after the first spike that we saw after the Red Sea crisis. So if you look at where we are now and you compare that to what we had in March, April of this year, we're actually not that far apart. What are our priorities for the remainder of this year? And after that, of course, the first priority remains to keep our people safe, and we will also continue to invest to make our team stronger. Then we need to make sure that we have a successful start of Gemini Corporation, which is where a lot of the work that we're doing at this point in time is focused on. We continue to implement Our strategy, 2030, I think really good progress throughout 2024, and hopefully we can maintain that momentum also into 2025. And, of course, we need to remain agile because if something changes, we need to make sure that we react swiftly to that. So with that, I would hand it back for Q&A.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. Our first question comes from Omar Nocta and Jefferies. Please go ahead.

Thank you. Hi, Ralph, Mark. Good morning. I wanted to ask about the current state of the market. There's obviously a lot of variables in dealing with how things look post the U.S. election. Tariffs have been a big topic of discussion. I just have two questions on that. First, this idea or discussion point of pre-ordering ahead of tariffs and how that could lead to a tighter freight market from here. Is that a real possibility? Is that going on currently? Is there any way to define the magnitude of that? And then Second, under the last Trump presidency, you had the U.S.-China trade war previously. How do you recall that having impacted the market? Thank you.

I think to take your two questions, I think that we're going to see a little bit of a rush into Chinese New Year. I would certainly not rule that out. We see at the moment the demand is very healthy. We saw pre-summer that there were quite a lot of people that were trying to get the stuff into especially the U.S., earlier than normal. So I would not rule out that we see something similar now towards the Chinese New Year. And of course, that would have most likely an effect on short-term rates. How big that is going to be, that's too early to tell. I think the entire year, as I said in the beginning, we've been surprised by how strong demand was. We also have seen it coming back quite quickly after the October holidays in China. So all the indications today are that demand is robust. How much of that is preloading, difficult to judge. When we look at the impact of the change in administration, I think that remains to be seen. I think last time when, or the first time when Trump was in power, we have certainly seen some effects of the tariffs that he imposed in particular for goods coming out of China. We saw also on the other hand that that did not necessarily mean that global trade went down, but it's more that flows have changed. And I would not be surprised if that's going to be something similar this time. Let's also not forget that in the end, if we want to grow wealth across the globe, it's important that we have free trade. And I hope that in the end that is something that everybody will remember. And yes, there will be some measures probably here and there, but I'm still cautiously optimistic that in the end, flows may change, but we hopefully will still see fairly decent global trade growth.

Okay, great. Thank you. And maybe just if I could ask a quick follow-up. You mentioned the pre-ordering that we saw earlier this year ahead of the port strike on the East Coast. I know it only lasted three days, but there's still a pending negotiation for January. There's some growing discussion or risk that, okay, there could be another strike. Is that something that you're seeing retailers or shippers in general preparing for again, another round of pre-ordering? I guess it's always hard to get a sense because you mentioned there's also the rush ahead of Chinese New Year, the potential tariffs. But any way to quantify or maybe even discuss if it's something at the moment that's happening in terms of preparing for a potential strike again in January? Okay.

I mean, we're not preparing for that at the moment. I mean, we read the news as well, but I would still hope that in the end an amicable agreement is being reached between USMX and the ILA. Okay. Thank you.

The next question comes from Christian at UBS. Please go ahead.

Hi. Thank you very much for taking my questions. Maybe the first one to continue on this demand point How do you think at the risk that post-Chinese New Year we move into this stocking phase, having in mind there may have been some front-loading as you flagged? So what's the best case for demand growth next year? Secondly, looking at Papa Gloy's December online quotes on Transpacific, I'm seeing several services that you're quoting above $9,000 per container versus the current spot rates of around $5,000. So could I please check if you can provide more color while driving this steep increase for the December online quotes? And the last one, if you'll allow me, on Gemini Alliance, I think one of the things that stands out with the Gemini is that it has a lower number of weekly services versus the other alliances, especially on Trans-Pacific, but across the other trade lines too. My question is, do you believe this could be a competitive disadvantage versus your peers that may translate into lower prices for Gemini? Thank you.

Let me try and take them one by one. I think if we look at your first question on how do we look at demand next year, For now, we plan and we expect to see a growth of around 3% throughout 2025. We don't have any better intel than that at this point in time. Whether there will be some de- or restocking post-Chinese New Year, I think that remains all speculation. It could also be, when you look at the stock exchange in the U.S., that the economy is going to grow faster, and that could surprise us to the upside. So I think with the We listen to the analysts. We read the reports. And based on that, our best estimate at this point in time is that we'll see growth roundabout, GDP growth of around 3% next year. Second question was on rates for Trans-Pacific. I mean, we know that demand is very strong. That also means that space is very tight. And that means that if you want to secure the last slots, then those typically become more expensive, and to your point on Gemini, I think where Gemini will hopefully be able to differentiate, where we will be able to differentiate from others is by hopefully providing better quality, not only in the customer service, but also in terms of better schedule reliability. In the end, that will hopefully convince customers that they need to move with us, and maybe they will then pay over time they may also be willing to pay a little bit more money for that. So, no, I do not expect us to attract cargo at lower rates. If anything, I would expect that because of higher schedule reliability and better predictability in the supply chain, people might be willing to pay a little bit more. But, of course, we first need to implement now and then need to demonstrate that we can deliver that schedule reliability week in, week out.

Understood. That's very helpful. If you allow me, could I ask one last short question? Go ahead. Thank you. On your contract rates currently in place, you pointed out the spot rates have been increasing recently, especially on Far East Europe. I remember, according to different industry sources, the contracts that were signed on Far East Europe at the beginning of this year or late last year, were around $1,500, $1,700 per container. The spot rates are much higher than that now. So my question is a bit, when you compare your contract rates versus the current spot, is it fair to say that they are significantly below? And would it be fair to expect that we could see a meaningful step up in your contract rates if the spot rates persist at these levels over the next month? Thank you.

I think you're right that at the moment contract rates are significantly lower than spot rates. You typically see that over time when spot rates go up and remain elevated, that contract rates will also go up. So, indeed, if spot rates remain around today's level, one should certainly expect that the contract rates for next year are going to go up versus what we have in place today. That would be logical.

Thank you very much.

The next question comes from Shati Safikumar with Citi. Please go ahead.

Thanks, Rolf and Mark. I got three questions here, maybe just touching on the topic of contract rates. Given now we are in mid-November, you should have started the Asia to Europe contracting negotiations. So are you, like, actually seeing that normal, like, upward trend where contractors are trying to converge towards the spot, or there is still an resistance from the shippers to sign anything close to the spot rates. And the second one is around the new vessel order. If I look at your vessel order, right, so total vessels are on 16.8 KTU. And if I compare this historically, like, we've probably seen orders about 20,000 TUs. And this is obviously slightly below the ultra-large vessels, like, size-wise. Just trying to get a sense, is it actually, like, driven by unit cost of economics is no longer, like, attractive with, say, larger ships, given the fuel mix here, or is it just to do with the price and the shipyard's capability in terms of vessel size? Just wanted to get a sense around that, what made you to do more towards, say, lower end of the ultra-large vessel size rather than 20,000-plus TV vessels? And the third one is around the EU ETS. Obviously, this is the year one of EU ETS. Can you, like, just help us understand what has been the overall carbon cost implication for you? How much have been successfully being passed on to your customers right now?

Yeah, thank you. Again, one by one, I mean, in terms of contract rates, still very early on for the Far East contracting season, I mean, yes, negotiations have started in many cases, but most of those contracts will only be closed in the first quarter. Of course, the early ones that have been closed, there we definitely see that rates are up. They don't go to the level of sports. That's also what you normally don't see, but they are definitely up compared to what we had before. On the ships, no, that does not have to do so much with economies of scale. It's more to do with the composition of our overall fleet. I mean, we have 12 ships in the 24K size class. We have various series in the 13 and 15K class. We did not have anything in the 17K class. So it's just more a vessel portfolio decision than economies of scale because on a per unit basis, the 24Ks are still more efficient than the 17Ks. Then EU ETS, I mean, we have passed that on to our customers in a separate surcharge. We'll continue to do also next year. When it's around the exact amount for this year, I would have to ask one of my colleagues here to chip in on that. $8 per TU. Sorry? $8 per TU. Here you go. $8 per TU, so that's around about $100 million, close to $100 million. $8 per TU.

Maybe just a quick follow-up, again, on the Asia to Europe. You said what have been found. Are we seeing, say, mid-to-wide single-digit increase? Because I remember earlier this year you were saying that you mostly ended up broadly flat, given the reluctance from the shippers. Yeah, I just wanted to get a sense. Are we seeing, like, a good increase? Or, again, I'm not asking the exact numbers, but just directionally, where are you heading?

I think we have seen solid increases. I don't know off the top of my head how big those were because I didn't compare, you know, the old and the new contracts that we closed for specific customers. But we have certainly seen significant increases, which you would also expect when you look at the small trades over the last nine to 12 months. And also don't forget that many of the contracts last year were closed before we had the Red Sea crisis. So our costs are up. significantly. You know, when we look at Asia, Europe, EU ETS is up from 40 to 70% next year. So there are all kinds of reasons why those rates should definitely go up and then look at spot rates as well. So I'm not surprised that we see significant increase. How big they exactly are, I don't know off the top of my head.

Got it, yeah. Thank you. Thanks. We continue with a question from R2 and DB. Please go ahead.

Morning, Rolf. Morning, Mark. A couple of questions. First, in terms of the volume growth, what are you seeing in terms of year-on-year volume growth for October and the start of November? I guess the comps from your standpoint are pretty easy for Q4. And then just when I look at sort of your guidance, even at the top end in terms of EBIT, that shows a significant step down in profit into Q4. I think you're implying basically about 860 million at the top end for Q4 versus more than a billion in Q3. Given that demand is healthy and we've discussed the preloading rates, we discussed in patches, could and should be up. I just wondered, a why you might why you haven't adjusted the bottom end of the guidance or why you see that as a possibility and you know is it fair to say that your sort of top end is probably more like a base case rather a sort of a best case uh guidance um for the rest of the year thank you i mean as far as we as far if we look at the at volume

We see decent growth in October and November, as we also expected. I think we've indicated that we expect to land at about 5% for the full year. I think that still remains valid. When you look at our guidance, yes, we do not expect Q4 to be the same as Q3. Also, when you look at what happened to spot rates and if you look at the SCFI index, you'll see that it's currently 30-plus percent down, I believe. Yes? compared to the peak. So that's why you would also expect that to be a little bit lower. And I mean, we just adjusted our guidance a couple of weeks ago, and we see no reason at the moment to change that.

Maybe if I could ask just one around sort of demand in terms of your sort of customer segments, which segments are kind of doing well and which ones, I guess, auto is probably in the category of not doing so well at the moment. Maybe some sort of industry flavor, please. Thank you.

I think that's always very difficult because we have a fair chunk of our business. Over 60% is forwarders who carry, of course, all kinds of cargo, so very difficult to to judge exactly what the commodity mix is doing. I think you are right when you're saying that, you know, European auto is not exactly booming, but we do see that imports very much driven also by retail into the U.S., but also Europe and Latin America are still very strong.

Thanks very much.

Our next question comes from and Clarkson Securities. Please go ahead.

Thank you.

Hi, guys. I have two questions. The first one is on the Gemini. As far as I understand it, you'll have fewer port calls in, let's say, Asia and Europe. So between the hubs, really, you'll spend less time in ports and I would imagine that you need less or fewer ships. Is that correct? And if so, can you try to quantify the effect of that? But then on the spokes part, I assume you need more ships to do seed ring, right? Any color on that?

I mean, I think you're right. I mean, we are planning a few port calls in Asia and Europe. and also in the U.S., because we believe that having fewer port goals gives us a better chance to sail on time. So that is absolutely correct. And then when you look at how many ships we need, we do believe that once the network is up and running, that on average we will have better utilization of our assets. So that should mean that we can transport some more TEUs with the same amount of steel.

Okay. And feed ring, do you have any more? Feed their business on the, let's say, final legs business?

Yeah, I mean, we will need, we will ask for more feeder capacity, but the comment I made earlier is on the entire network. I think the big benefit of the structure that we have chosen with Gemini is that on average our ships will be better utilized because you don't have these long shoulders of the services in Asia and Europe where you have very low utilization in the first three, four, five, six ports. Then you have a stretch which is very full and then the ship is being emptied again. In the Gemini network, you will have two or three port calls, then the ship is full. Then we offload it in the hub and basically turn it around or make one or two more calls. That gives you, on average, better asset utilization. And that includes the shuttles. So if you have better asset utilization, you can transport more cargo with the same number of ships across the entire network. And that is, I think, one of the benefits that we expect to get from moving into that structure.

That's good. Very well. A second question I had is on the carbon intensity, at least estimates are that the CAI metrics are worsening this year because people need to bypass Africa, et cetera. Do you see the same? And if so, do you expect that, let's say, the wider industry needs to slow steam more next year to restore compliance?

Of course, we consume more fuel now as we sail around the Cape, so that's definitely not good for emissions. Totally agree with that. We also have to sail faster, because otherwise the delays will be even more. In the new network that we will operate in Gemini, we expect to sail again a little bit slower. That is correct. And as such, we also expect emissions to gradually come down. but not to the level that we used to have when we were able to sell through Suez.

Thank you very much.

As a reminder, if you wish to register for a question, you may press star and one. Our next question comes from Ulrich Back and SAB. Please go ahead.

Yes, hello. Thank you for taking my question. I just have one here. So the question is around the Gemini network. Given the significant changes to the network and the time it will take to phase in, do you see a risk of losing market share during this period and also incur higher cost during this transition phase? And if so, how do you intend to regain that potential loss of market share once it has been phased in? Thank you.

I mean, we do not expect to see any significant loss of market share. There will be some extra cost, of course, if we switch from one, whilst we switch from one network to another, that will hit us particularly, especially in Q1 and Q2. But I don't expect that to result in any material loss of market share. I would actually hope that over time, as people become more and more confident in the quality and schedule reliability that we're able to deliver, that we will be able to grow our market share slightly.

Okay, and if I just can add a follow-up question here. So in your current contract negotiations on the Far East Europe trade lane, has this Gemini network been a key lever to gain more contracts or just some call on that, please?

It's too early to say. We're just going into the contracting season. I mean, compared to where we were last year around this time, we have signed up a little bit more volume than last year, but that's way too early to draw any conclusions from that. Understood. Thank you.

Our last question comes from Marco Limite in Barclays. Please go ahead.

Hi, morning. Thanks for taking my questions. My first question is follow up on contract rates. So, yeah, clearly you sign up contract rates at the start of the year. but then there are plenty of surcharges going on top of those contract rates. So are you able to quantify what is the real discount, including all these surcharges that you're seeing in that quarter throughout the year of the contract rates versus the spot rate? So yeah, this is the first question. Second question, follow up on Gemini as well. Just wanted to clarify, the duration of the journey, is that materially different in the hub-and-spoke model, or is it going to be materially different in the hub-and-spoke model versus the normal model? So are customers actually also saving time by going with the Gemini versus the traditional model? And the third question, I think you have mentioned before, that with the new IMO model, rules, you will have to slow down speed. So just curious to, yeah, what is, let's say, the buffer in terms of speed and what does that mean in terms of capacity? Thank you.

I mean, to take the last one maybe first, when we look at the IMO rules, I think that over time, If I recall it correctly, next year we plan to sail roughly one lot slower than we do this year. Then when you look at Gemini, we expect that for most of the port pairs, the transit time will actually be shorter than what we see in reality today across the industry. Important here to note. be clear that when we look at will we be slower or faster, we compare it to reality. We don't compare it to some of the schedules that are being published but that are not being adhered to. If we compare what we will deliver next year with what we actually see across the industry today, then in most of the port pairs, we're actually going to be faster. And then when we look at contract rates, I think the discount – when looking at contract rates compared to spot rates, also in Q3, still very significant. Thank you.

Gentlemen, that was the last question. Back to you for the closing remarks.

Just thank you from our side. Appreciate the questions and appreciate you making the time and hope to speak to many of you again soon. Thank you very much.