Ladies and gentlemen, thank you for standing by. I'm Timo, your cross call operator. Welcome, and thank you for joining the Hapag-Lloyd Analysts and Investors Full 2019 Results Conference Call. Hapag-Lloyd is represented by Rolf Habben Jansen, CEO, Mark Frese, CFO, Heiko Hoffmann, Head of Investor Relations, and Anna Neumar from Investor Relations team. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Rolf Habben Jansen, CEO. Please go ahead.
Thank you very much. On behalf of Hapag-Lloyd and Mark and myself, thank you for making the time and apologies for the small delay in getting started. Let's get going. I mean, if we look to you, for those that are on the webcast, maybe a couple of opening remarks. Of course, when we look today, we talk about the full year 2019, but we definitely need to look also at today's situation, where it sounds sometimes like 2019 is a very long time ago. Right now, our priorities are clearly the personal health of all our staff, whether on land or at sea. Apart from that, when we look at our biness so far, the impact of the entire corona crisis thus far is limited.
We would say, though, that when we look ahead, we do expect to start seeing impact from the month May onwards. In order to make sure that we are well prepared, we are taking all kinds of measures to make sure that we are prepared, not only for a smaller crisis, but if needed, also for something that lasts a little bit longer. In terms of the market situation in the market today, I would say is very different from the crisis that we saw in 2008 to 2009, especially when we look at the supply situation, where today we have a very small order book. We'll talk a little bit more about that later on.
When we look at the numbers and what we did in 2019, I think we've made good progress in terms of in our strategy and getting towards 2023. We did improve our profits significantly and also believe that on the back of that, it is justified based on what we know today to propose a dividend of EUR 1.10 per share. The transition to 2020 because of IMO 2020 was smooth. When you look at the numbers, very significant increase in EBITDA. EBITDA also if you exclude the IFRS 16 effect. Very strong free cash flow of close to EUR 1.9 billion. Very good cash conversion, significantly better return on invested capital and a reduction of our debt of about EUR 1 billion.
In terms of the outlook, I think it's fair to say that the outlook today has a considerable higher uncertainty than we would normally have. Of course, that is caused by the coronavirus outbreak. We've nevertheless chosen to provide you with an outlook based on the data that we have today, and we'll be happy to talk to that also a little bit later. Apart from that, of course, our focus going forward will be cost, further deleveraging, and make sure that we keep enough cash, and then we will adjust as things come by. If we go to the next page, and talk about the coronavirus, which is, of course, affecting the shipping industry big time in 2020. I would say the magnitude that it is going to impact us is, at the moment, very difficult to assess.
For us, I would say there are three things really important. First and foremost, our team. It is about the safety of all of our employees, yeah. We have put quite a lot of measures in place to ensure that. In Asia, we were working in China for a long time with 100% from home. In the meantime, people are back into the office there. In other Asian countries, the situation is a little different. In some, we are already back. In others, we are still going to home office. That seems to be functioning fine. In Europe, we've had to move to significantly more home office as from roughly two weeks ago, when it started with Italy and Iberia.
As from the middle of last week, we have been doing the same in most of the North European markets, and so far, that has actually been going well. We have a crisis committee in place which meets every other day, and we monitor the situation globally on a daily basis. Probably the single most challenging thing is the fact that we have to now have everybody work from home, which puts a totally different burden on our IT system, and that takes some time to get used to, both for our people as well as for our systems. Today, we're in materially better shape than we were when this whole process started, and I think we'll be back to pretty much normal in the course of next week.
When you look at our business, I would say the overall impact on volume and cash flow in Q1 is very, very limited. If we look at the volume in Q1 is up and freight rate is more or less in line with expectations. Bunker prices were high towards the end of December and the beginning of January. It's hard to imagine that we used to pay that we paid over $700 a ton in Singapore for low sulfur fuel as late as six or eight weeks ago. That will definitely have a dampening effect on the result in Q1 also because we will have to write down quite a lot of the bunker if the bunker price stays at the level where it is today.
We expect to see some negative impact from the crisis, basically from May onwards. But to be fair, it's almost impossible to determine at this point in time what the exact impact will be and how long that will be. We do believe, however, that looking at what we can see today, that we think this will remain to be manageable, yeah. We will, in order to make sure that that also happens, work very closely with our partners. We've taken some additional measures already. First, we have on-hired equipment because we can see that due to the crisis, the global equipment flows have been very different from normal over the last couple of months, which meant that we had some difficulty getting the empties back to Asia. That's why we have on-hired about 80,000 TEUs in Asia.
We have also on-hired some equipment in Europe, because we've seen that the export from Europe has been very strong, so there we've taken on about 20,000-25,000 TEUs extra. We are of course looking at our investment plans. I don't think that if you look at it over the next two or three years, our investment program will change all that much. If you look specifically at the next couple of s, we will very likely try to push out some of the investments and certainly don't do any investment that is not strictly necessary, especially if volume comes down. In addition to that, we have already taken some measures to secure some additional liquidity to make sure that if the crisis lasts longer, we are well prepared for that.
If we take a little step back and look at the market and, I think this is the chart that we usually show you when we look at order book and newly placed orders and idle fleet. I think the reason to show this chart also this time is mainly to point out the difference between now and what we have seen in 2008 and 2009, when we, after the financial crisis, had a very long period of recovery. We think the crisis today is a very different one, and one of the things that could actually help us there is that the order book today is at pretty much an all-time low of around 10% of the global fleet.
Which is of course very different than the 50%-60% we used to see 12 years ago when we got into the financial crisis, because then still a lot of supply came in in the years after that, when demand was slowly starting to recover. We believe that will be different now. There will be a very significant idle fleet. The idle fleet, of course, has been pushed up already because of scrubber retrofits and also post the Chinese New Year. I think it is not unlikely that we will see the idle fleet going up further, as we and others will very likely be forced to adjust capacity to demand in the months to come. We think net capacity growth in 2020 will not as predicted be 3-something%.
As Clarksons already indicated, it's definitely gonna come down because of delayed retrofits and those type of things. We do believe, however, that because of additional measures that will have to be taken to adjust capacity to demand, that very likely when we look at effective capacity growth across 2020 versus 2019, in the end, we will end up in negative territory. Look, when we look at growth on the demand side, this is probably anybody's guess. When you look at the exports so far, they have taken down their estimates only a little bit.
Hello, this is the operator. Sorry, there was a technical issue. We are now back online. Sorry for that. Please go ahead, sir.
Thank you. We are still on page six of the presentation, trying to talk to demand. Where I said that the experts' opinion so far have indicated, everybody has taken down their forecast. I would expect, though, that some of those forecasts are gonna come back even further. Having said that, when we look at our business, we certainly see for the first three months, still a fairly decent growth. Are we good or?
Yeah.
Okay. We still expect decent growth for the first three months. Volumes for April also look okay. That also means that as we believe that in the end, supply chains will have to function and goods will have to flow, that there is still a likelihood that when we look at the overall year, that there will still be some growth, even if admittedly probably quite a lot less than people anticipated. That is, however, of course, surrounded with quite some uncertainty. When we look back at 2019 for a minute, and we look at our key performance indicators there. Transport volume up 1.4% or close to 3%, excluding Intra-Asia. Transport expenses under control, freight rate up, EBIT, group profit, EBITDA all significantly improved.
Equity up, liquidity reserves stable, and net debt up, but only due to IFRS 16. If you look at how much financial debt we repaid, it's actually close to EUR 1 billion. Based on what we know today, we propose a dividend of EUR 1.10 per share, and we have also decided to adjust our dividend policy. Our dividend policy going forward will read that we intend to pay a dividend of at least 30% of the respective group net profit, as we believe that is prudent, looking at where markets are today. We stick to the proposal that we made a few weeks ago, for the very simple reason that we today do not see any data that would lead us to a different conclusion.
Yeah. I also noticed that a similar statement was actually made by one of our largest competitors also this morning. When we look towards our strategy and look back at 2019, I'd say we made very good progress. Our three main goals remain a global player with a market share of roughly 10%. We maintain that market share by growing, excluding Intra-Asia, definitely in line and probably a little bit faster than market. We came out of 2019 with some good growth, so with quite some momentum into 2020. We grew into segments where we wanted to do more, and we were also able to launch a couple of new services in what we would see as attractive markets.
In terms of the financials, and Mark will talk a lot more about that, I already mentioned results, quite up quite a lot. Financial debt reduced by EUR 1 billion. Our leverage target of 3.5, actually overachieved to 3.0 and excluding IFRS 16, 3.1. Good liquidity reserve. We achieved the cost savings that we wanted, and I believe we also made good progress in revenue management. On the quality side, we launched the quality promises, the 10 that we defined in the course of 2019, the first 3 meantime operational. On our platform, Quick Quotes, our online channel, we grew from a little bit over 300,000 TEU in 2018 to close to 1 million in 2019, and meantime, our run rate there is up further. We improved the profitability of inland corridors.
We established a number of quality service centers, which are core for our network in Suzhou, in Mumbai, and a couple of other places. Also feedback from our customers as measured by the Net Promoter Score was up quite a bit. In terms of savings, not much to say to page 10. We did a bit more than we anticipated, and we will try to do even more in 2020. We will step up our efforts there, and then we'll see how far we get, hopefully a little bit above the original target for 2021. Quick update on IMO 2020. The operational transition went smoothly. Most of our ships on average switched from high sulfur to low sulfur fuel around the 20th of December. We think that's actually a very good outcome, yeah.
We have, of course, seen that the fuel cost came up very significantly around the end of 2019 and the beginning of 2020. That has certainly resulted for us in some cost that was a little bit higher than we anticipated. The spread at some point in time was up to well over $300. We saw actually afterwards markets already normalizing again quite quickly to a spread between, I would say, $150 and $200. Of course, that has come further down over the last two weeks as crude prices have really plummeted. I believe we've been successful in recovering the extra cost, although admittedly, sometimes with a little bit of delay through the MFR that we have announced and also the surcharge on short-term business.
All in all, I would say the transition went fairly smooth. With that, I would then now hand it over to Mark, who will take us through in a little bit more detail some of the numbers.
Yes. Thank you, Rolf, and also good afternoon from my side. First of all, as it's my first call, I'm quite excited to work for Hapag-Lloyd now. I'm very much in favor to support Hapag-Lloyd, the team, and the Strategy 2023, and I hope to have the chance to introduce myself in the course of the next couple of months and to follow up on your open and transparent relationship. The financial year 2019 was a very successful year for Hapag-Lloyd. The company delivered on the profitability goals and improved the balance sheet. Transport volumes increased in line with market slightly by 1.4%. Average freight rate increased by 2.7%. Also a result focusing on profitable trades and implementing revenue management measures.
At the same time, bunker consumption price was down $5 per metric ton, which had a positive impact on transport expenses, which decreased substantially by $460 million, also due to the impact of the first-time application of the IFRS 16. Besides lower bunker cost, the development was mainly driven by lower costs for handling and haulage, but higher charter and repositioning costs for empty containers dampened the decrease in part. As a result, EBITDA increased significantly by over 60% to $2.2 billion, including a positive effect of IFRS 16, which amounted to roughly $500 million. Earnings after tax increased substantially by more than $360 million to over $400 million, despite a negative effect from the first-time application of the new standard of around $40 million.
Ex IFRS 16, financial debt was substantially reduced by almost EUR 1 billion, as already said, mainly due to our much better higher free cash flow and the repayment of our Euro bonds. Our cash conversion was very strong, roughly 100%, which shows that we are able to turn profit into cash. Net debt to EBITDA reduced accordingly to 3x and thus well below our 2019 target of 3.5. Driven by the strong result improvement, the return on invested capital increased to 6.1% after 3.7% last year, and we are close to our cost of capital. Looking on page 13, focusing shortly on Q4 2019, results improved compared to previous year, mainly due to lower bunker costs and continuous cost management.
Revenue was EUR 3.5 below previous year, mainly due to 2% lower freight rates, and a strong Q4 last year, 2018. Also, revenue from demurrage and detention was slightly below previous year. EBITDA in Q4 , on the other hand, increased by roughly 40%, partially explained by the IFRS 16 effect, also due to and a positive effect of $77 per metric ton lower average bunker consumption price. And for sure, still and always focusing on cost. EBITDA margin increased to 15.2%. Accordingly, EBIT increased by over 10% almost to $190 million, an EBIT margin of 5.4%. Group profit then doubled to $85 million. It was a little bit negative, impacted by the new standard, close to EUR 10 million.
On page 14, we can see that 2019 was a successful year. Results improved significantly, mainly due to efficiency gains and the implementation of our strategy. Group revenue grew by over $400 million, or almost $400 million to $14.1 billion, representing an increase of almost 3%. The increase was mainly driven by slightly increased transport volume and higher freight rates. EBITDA increased significantly. EBITDA margin increased accordingly to 15.8%. EBIT also increased significantly to in total over $900 million and accordingly to a margin of 6.4%. Overall, Group profit was significantly up from the previous year to $480 million. Earnings per share amounted to $2.31 per share. Our Return on Invested Capital grew to 6.1%.
Overall, looking at the transport volumes. Looking at the global economic environment, which was already described, transport volumes grew slightly by 1.4% to roughly 12 million TEUs, and was therefore more or less in line with the market, as we said. The growth was primarily driven by Atlantic, Far East, Latin America, and EMA trades, whereas Transpacific, especially Intra-Asia, have seen a volume decline. Especially Intra-Asia was a strategic decision to focus on much more profitable services. The continued strength of the domestic e-economy in the U.S. enabled a year-on-year increase of roughly 6% in the transport volume on the Atlantic trade. On the Far East trades, the year-on-year rise was 4% due to rising market growth and increased allocation we did, so more vessel capacity.
At the same time, the transport volume of the EMA trade grew significantly by around 14% as a result of the introduction of new services in 2009, which was part of the Strategy 2023. In Q4, transport volume increased by 1.7% compared to previous year. Excluding the Intra-Asia effect already mentioned, the growth was 2.9% and thus in line with the total year 2019. On page 16, having a look on the freight rates, which increased by 2.7% to $1,072 per TEU. Year-on-year increase was primarily due to the profitable trades and the reduced Intra-Asia business and the revenue measures we took.
In addition, focusing on reefers and on special cargo as part of the strategy, really paid off. The average bunker consumption price decreased at that time by around about 1.2% to $416, especially driven by the development at the end of the year. Adjusted for bunker, average rate per TEU increased by almost 4% year-on-year. Looking at page 17, we have already quite competitive transport expenses per unit. Still it decreased further slightly by roughly 1% compared to previous year due to lower bunker, but also due to cost savings initiated. Especially unit costs for handling and haulage declined as less profitable inland business were actively reduced.
Those measures, among others, had to compensate for increases in other cost areas, like higher container repositioning costs and higher charter rates. Cost competitiveness for sure remains, as Rolf already said, a clear focus. It for sure must remain also in 2020. Looking at free cash flow on page 18. On the basis of good results we have just described, we had just really strong development of our free cash flow compared to last year, the increase of over 60%+ besides the IFRS 16 effects, mainly due to very high cash conversion via working capital management and a very cautious investment policy, still way below our depreciation. CapEx in 2019 was primarily focused on containers.
In addition, for sure, we had some investment on ship equipment, retrofitting of ships, and for sure to comply with the IMO 2020. The strong cash flow was used to repay debt substantially, as already said, so therefore, we could really delever our balance sheet. Liquidity reserve is at EUR 1.2 billion and therefore still in line with our targets. Looking at page 19, showing that our balance sheet was substantially influenced by first-time application of the IFRS 16. Fixed assets increased strongly, and without the IFRS 16, fixed assets would have decreased by around $400 million to $14.2 billion. Equity increased and, with that, on the same level of 41% was possible even despite the IFRS 16-driven increase to keep that on that very stable and good level.
On the debt side, we clearly delevered the group, which was an important focus. In 2020, showing that we surpassed our leverage ratio as already set, and we are now at 3.0, including an ex-IFRS 16, it would have been 3.1 times. Concluding from a financial perspective, very good 2019, substantial improvement of operational results. We fulfilled our targets, reduced our financial debt load, and kept a very adequate liquidity position. We will for sure keep our very conservative financial policy, on that basis, even if we have to react to all coming market changes and market conditions. As Rolf already said, we have taken already some measures here. Our cost focus must remain, to keep a very competitive cost structure. Debt is pretty clear, already set.
Our financial strategy is and has to be very cash-oriented, and we have to cope with these increased uncertainties coming up. Based on that very solid liquidity reserve of almost EUR 1.2 billion at the end of 2019, we have sufficient resources, and we will for sure preserve with new measures our liquidity buffer. We have increased our already prolonged RCF program of $600 million until end of August 2023. Have additional liquidity cushion due to our ABS program of $550 million. As we have repaid our bond earlier, there is no maturity to come, which helps us therefore that the current weakness in the secondary market has no immediate impact on us.
All in all, we have sufficient liquidity buffers for the times to come and the unsecured situation which might occur. From a CFO perspective, we will focus on that, focus on liquidity and on cash. Having said that, I would like to give back to Rolf to focus and explain our outlook.
Yes, Mark, thank you very, very much. Well, I think as it says in the header of the chart as well, the earnings outlook is clearly subject to very considerable uncertainty, yeah, particularly because of the coronavirus outbreak. I think that is important to keep in mind when we look at that. Our approach has been to look at the data that we see today, yeah, and then to try and make our assessment, how do we think things will go further. We have seen, from a market and volume perspective, a very robust Q1 . We don't see any material change in the month of April, but we do expect to see effects from May onwards.
Having said that, we also do assume that there will be a somewhat of a recovery later on in the year.
Yeah.
On the back of that, we think that it's not unlikely that we still will see a slight increase in the volume that we carry. If we look at freight rates, they have been robust in the Q1 , more or less the same story. We do expect that that will also hold throughout the year, although that admittedly is also linked somewhat to the third point, which is around bunker. If you would have asked anyone probably two weeks ago, everybody would have said, bunker prices on the back of IMO 2020 will increase very clearly.
Looking at what happened in the last 10 days to two weeks on the oil markets, one could now have another opinion. We've chosen for the time being to leave that unchanged as we recognize that markets are very volatile, but there is clearly also a connection there between how you look at freight rate and how you look at bunker price. When we look at results, we're predicting an EBITDA of between EUR 1.7 billion and EUR 2.2 billion, and an EBIT of between EUR 0.5 billion and EUR 1 billion. You will notice that we made the range a little bit broader than we did last year. That reflects also, I think, a little bit the uncertainty that we see in the market.
We do believe, however, that looking at everything that we can see today, there is right now no reason to adjust this forecast or to leave it out. Because I do believe that even if there is a fair amount of uncertainty, it still helps if we try to provide you with our outlook based on the data that we see at this point in time, recognizing that if things come different, then at some point in time, you will have to revert to that. With that, it brings us to our main targets or priorities for 2020, which remain largely unchanged. As always, we'll need to react swiftly if markets change. In light of the crisis, we reemphasize that our financial policy remains conservative, and we will keep a very strong focus on cash.
We need to make sure that if markets come back, we pass on the higher bunker costs that are coming on the back of IMO 2020, and we will also continue to implement a number of initiatives that are linked to our Strategy 2023, even if some of them may be delayed a little bit. I think that sums it up so far from our side, and then we would be happy to take any questions that you may have. Over back-
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Sathish Kumar with Citigroup. Your question, please.
Thanks very much for taking my questions. I have three questions. Firstly, on the current bookings for Q2, you mentioned that you're not seeing any impact on April bookings so far. Just to clarify on that, are you saying that volumes are actually, or bookings are actually up year-on-year? And directionally, what is the trend like? And on that, actually, are you seeing any pocket of weakness by different trade lanes? So that's my first question. Secondly, on the contract negotiation, if you could just update us on the Transpacific negotiation. Have you started to see any impact due to the recent uncertainties on Transpacific? And also, how did the Asia to Europe contract negotiation end up? And finally, on the scrubber, you mentioned that you're likely to see more delays.
What is the average days that vessel is actually being held up at a dry dock? When do you expect it to be, like, in terms of all the vessels coming back into the service by Q3 or Q4? That's it. Thanks.
Maybe first point first on bookings. If we look at bookings, then we tend to look at the start of shipments. That means our shipments leaving last week or this week or next week. Those are typically the ones that will then arrive in the month of April. So far, we see bookings every week in the last couple of weeks to be around or slightly better than what we have seen last year in terms of numbers. As most of the bookings for April meantime have been done, that's why we do not anticipate any material impact into April. If we look at forward bookings, I think that's where the uncertainty comes in because that's when, people still have an opportunity to change that or cancel that.
That's also why at this point in time, we don't want to say anything beyond April, because I believe it will take a couple of weeks before we will have some more clarity on what is actually going to happen with most of those booking curves. In terms of the contracts, to be honest, it's still a little bit early to say something around that. I think when we look at the Asia Europe trade, then I think we've been generally quite happy with what has been closed. Most of the rates have been up, and we have also seen a reflection, because we, pretty much all of the contracts, we have the fuel price clauses, so also that is properly reflected in those contracts.
Of course, if fuel price remains at the level where it is today, yeah, then in the end, the all-in price could actually, yeah, not be up, but I think that's too early to really speculate about that. On the TP, the whole season has actually been a little bit delayed, so we are really there only in round one, round two with most of the customers. The few contracts that have been closed so far have been closed at slightly higher levels than what we had last year. But also, because the TPM got canceled, the whole season has actually been shifted backwards a little bit. In terms of scrubbers, there's a high variance in the delays that we have seen. Most of the delays have been between 30 and 60 days.
We also see that the yards start to operate more and more normal again. We actually have a couple of ships that are going into dry dock now, and we expect them to come out without much delay.
Yeah. I just have one quick follow-up on your contract negotiation. When you say it's been done higher than last year, does it include the impact of bunker surcharge, or we are just talking about ex bunker surcharge on both the years?
If you look at the year-on-year, then the ex-bunker rate is up. Yeah. If you look at what the effect will be on fuel, nobody knows. Yeah. I mean, normally, because of the formulas that we've had, that would have pushed the rates up. Yeah. If fuel stays at the level where it is today, then after Q1 or after Q2, then that will come down.
Okay. Thank you very much.
The next question is from the line of Adrian Puel with Commerzbank. Your question, please.
Yes. Hi, everybody. Good afternoon. Actually, I've got four, basically. Well, first of all, a question of understanding. I don't know if I got that correct. You said, obviously in, Europe, you see quite some, good export business, and for that reason, you have a bit more of capacity. I was just wondering whether that was referring rather to the status as we have been just recently, or is that actually what you expect going forward? Because obviously the market seems to play a little bit, the demise of, the automotive business and also probably a bit industrial engineering. So I was really wondering myself what you actually do see here. The second question is on your guidance. I'm trying to get my head around, what triggers the lower and the upper end.
I mean, I understand that obviously it is given on the potential impact or non-impact that you see from Corona already. You're obviously saying, well, there could be some effects going forward, but I should take it that those effects might be baked into it already. However, maybe you could share with us your view on what triggers the lower, the upper end in terms of, how many months of Corona do you see here? Also in particular, what is the bunker range that you have in mind for the full year, actually at, for your guidance? Thirdly, as there is a nice chart in the appendix on page 36, on the bond trading, actually the bond that is outstanding still, has been hit quite severely.
It is recovering today, but would you consider actually buying your bond back in the market at a certain threshold of whatever, eighty or something, to potentially make some profit on this? Lastly, on market share, is this actually the time now where you can prove to your customers being in an industry considered as commodity, that you actually can differentiate in terms of services? Have you been successful on that also with the expanded services that you're offering in the hinterland, or what are your experiences short-term on that? Thank you.
Okay. Thank you. Well, I'll try to take them one by one. As far as we talk about European export, I mean, that's mainly been export in the beginning of the year. As you rightfully point out, there are now a number of factory closures, which very likely at some point will result in a reduction. We have, however, seen very strong exports in the first couple of months and still have a backlog in order to get that cargo out, so that's not gonna change from today to tomorrow.
Your point on the guidance, I mean, I think in the end, what we did is, you try to look at what you see in terms of data for the first couple of months, and then you try to make an assessment of what's gonna happen in the rest of the year, where, of course, we have tons of scenarios. I think, we are looking at a scenario where we definitely will see some pretty significant impact in the months to come. Yeah. That will probably not all be over by Q2, but we also don't expect it to, we also don't expect that there will be no recovery whatsoever, yeah, until the end of the year. In between that, yeah, bandwidth, that's where you roughly have to see the forecast.
In terms of bunker price, that's probably anybody's guess. I think in the end, there will be quite a correlation between what happens with the bunker and also how quickly markets recover. We anticipate that at some point, markets will recover, and we expect the fuel price then also to recover, maybe not to the level that we saw in January, but we expect to see some recovery. In terms of the bonds, your third question, we have also seen it trading below par, and yes, we would consider at some point to buy some of that back at some price.
Your last point on market share, in the time like where we are today, when we face a lot of uncertainty, our approach is not to go and hunt for market share. Our approach is to take care of our customers, make sure we provide them with good service and hopefully get some loyalty out of that for them. We are definitely not gonna go aggressively to try and gain market share.
Right. Maybe follow up on bunker and a question to some extent that has been asked before on scrubbers. I mean, given actually that the bunker price is so favorable at the moment, in particular, actually, as the spread has declined quite substantially. I mean, how rewarding is it at the moment actually, to push for scrubbers? Or would you actually think about it, not pushing for that to the extent you planned before?
Well, I mean, you know that we have never been the one that has gone the most for scrubbers, yeah?
Right.
We've always said we look at it as a portfolio of our fleet, and we believe that a portion of that should have scrubbers. To be honest, the fact that the spread is now very narrow doesn't really change my view. The fact that it was very high in January also didn't change my view. I think it's all about what do you believe midterm. Midterm, there is probably going to remain a spread, and if you believe that that's gonna be round about $150 a ton or something like that, then if you believe that, then there might still be some ships where you want to install scrubbers. We are not gonna have those type of decisions being driven by what happens in the oil markets in the last two weeks or in the next two weeks.
We'll try to look at what do we expect longer term, looking at the fundamentals of that market, and I think actually that will likely lead to a decision to install a few more scrubbers at some point beyond what we have commissioned already today.
All right. Thank you very much.
The next question is from the line of Frans Hoyer with Handelsbanken. Please go ahead.
Hi. Thank you very much. I believe I'm right in thinking that Hapag-Lloyd does not have any new build vessels coming in 2020, but a number of other peers will take deliveries. I hear what you're saying about not chasing volumes and market share. How do you look at the dynamic others will need to add some market share to fill their incoming new builds? What are the risks? How do you plan to operate in that environment, please?
I mean, the number of new builds that's gonna be delivered this year is actually not a lot, yeah. As we saw also in the chart on what we expect to see in terms of net capacity development, I expect that net capacity available to the market will go down this year, because people will have to take measures to adjust to declining demand, at least for some months. I also do not expect that there will be a very aggressive fight for market share, but of course, you never know, yeah. We will protect what we have, but we will not try to grow aggressively. I mean, all the rest is just speculation.
Because not that many ships come in, I don't think anyone actually in today has a huge problem to deploy those ships within the services that they already operate today. As the market will quite likely face some disruption, yeah, in one way, shape, or form, it might also be that we need a few more ships to offer the same type of schedule, yeah. Simply because there may be delays here or there if disruption would occur at one or the other port.
Understood. Thank you. Now I saw your slide that the realized bunker price was $390 per ton in Q4. With the transition taking effect in early January, can you give us an idea of ballpark figure, what your realized price is going to be in Q1, please?
Yeah. I mean, I think it's gonna be a little bit north of 500.
Thank you. Okay. Thank you very much.
The next question is from the line of Sam Bland with JP Morgan. Please go ahead.
Hi there. Two questions from me, if I can, please. The first one was just to clarify on Q1 volume. I think you said that maybe bookings were slightly up year-on-year. Does that also mean that Q1 volumes are up slightly year-on-year? One of your peers obviously reporting this morning, and I think they're saying something quite different. The second one was just, could you talk about the use of blank sailings? I know you've obviously mentioned that idle capacity is expected to probably increase a little bit in 2020. How do these blank sailings impact profitability? Obviously, I guess, they support freight rates by taking capacity out of the market, but some of the cost presumably doesn't go away. So how do you think about the right level of those to use? Thanks.
I mean, maybe to take your first question first. I mean, when we look at volume in Q1, we indeed expect that volume in Q1 year-over-year will be up. Not massively, but it will be up. Your question on VMS or Blank Sailings. I mean, if there is no demand, then you have to cut costs. That's in the end what our job is, because we need to make sure that we don't provide too much capacity for the demand that is there. Ideally, you would like to do that by restructuring services, but on short notice, that in many cases is not possible.
Then the only alternative that remains is to blank a sailing, because then you at least save the variable cost, which , if you look at it on a very high level, is roughly 60% of the sailing. Yeah. So, then you save at least 60% of the cost and then get only stuck with roughly 40% of the fixed cost. So, it's not great, but it's better than sailing empty.
Sure. Thank you. I have a quick follow-up on the first one. I mean, presumably, I would guess that market volumes probably weren't up slightly year-on-year in Q1, although I could be wrong there. Do you expect you probably gained some share?
I don't know. I mean, in fairness, I think we came out of 2019 with quite good momentum in the last number of weeks. I think as pretty much anyone accounts on an end of voyage basis. We also had a good run up to Chinese New Year and ever since have been able to compensate some of the volumes. Also, elsewhere, I think we are up. I think if you start looking also at the various trade lanes, et cetera, that may still look a little bit different. I would still not be surprised, though, if overall market is not down a lot in Q1. Those data are not-
Okay.
Yeah.
All right. That's great. Thank you.
The next question is from the line of Christian Nagl with Warburg Research. Your question please.
Yes. Hello, I hope you can hear me.
Yes.
Okay, great. Thank you. Maybe the first question on the dividend. You explicitly said that the proposal is based on what you know as of today. So does this actually mean that you do not rule out that you will pull the dividend proposal in case that things will get worse? Second question relates to your shareholder structure, which is not very attractive from the free float perspective. Is there any change there or in the part or any thoughts? And last but not least, Hyundai will join your alliance as of May, so how are the preparation works doing? Is there anything what you can highlight? And what does this step also actually mean for the competitiveness of the alliance with the two competing ones? Thank you.
Okay. Well, maybe first question, I mean, as always, you have to make a dividend proposal based on the knowledge that you have at that point in time, yeah. We would not make that dividend proposal if we would have the intention to withdraw it at a later stage. Otherwise, you shouldn't make the proposal. You shouldn't read too much into that. The free float is low at the moment, so there's no material change there, right now. We still hope that we'll be able to get it up over time, but that's not gonna change from today to tomorrow. We're happy that Hyundai joined us in the alliance because that helps us to become more competitive, and the preparations for that are actually pretty much on track. I don't expect any difficulties.
I think the last critical thing was that the MSC and HMM were gonna give back some of the ships to Hyundai. That has been done as planned, so we should be good to go.
Thank you.
The next question is from the line of Adrian Pehl with Commerzbank. Please go ahead.
Yes. Hi again. Thanks for taking my follow-up questions. Actually, I've got two of them. First of all, if you read articles, they suggest that there's a huge problem in the supply chains on container being at the wrong ports and locations. Actually that container liners will obviously take some time to sort that out. I was wondering what you think of that, how long it's gonna last. Are you taking some benefit out of that or some extra cost associated with this incident here?
Secondly, on the lead times, in terms of travel, do you see risk arising that you have to take your ships into quarantine at some ports, simply adding two weeks to the normal lead times or travel times that we have or what's the situation that you're currently experiencing here? Thank you.
Let me take the second question first. I mean, in these days, I think it's very difficult to rule anything out. Right now, we don't see any indications that that lead times are being significantly extended because of quarantine measures in ports. We've seen so many new measures from all kinds of governments around the globe that I will not rule out anything on that at this point in time. That's also why I mentioned earlier that because of some of the disruptions; I do expect that some of the new ships that are actually coming in may actually be needed to ensure that the schedules are somewhat maintained.
In terms of boxes, it is correct that because of the disruption we've seen in normal patterns in Q1, as China was shut down for longer than normal, that we have some shortages and surpluses of boxes in places where we normally don't have them. The way that we have reacted on that is by on hiring boxes. We've on hired, I believe I mentioned it also, between 20,000 and 25,000 TEU in Europe, and we have also on hired about 80,000 TEUs in China. We do that basically to ensure that we indeed can continue to load the boxes.
Okay. I'm a bit surprised that actually that capacity is obviously available. Is that at significantly higher prices, I assume?
I think it's actually okay. No, I think the prices are, I mean, they are not record low, but they are on a, if you look at it over a, say, over a longer period of time, they are definitely not above market.
Yeah. Okay. Interesting. Thank you. Stay safe and healthy.
Thank you. Good.
This was the last question. Back for closing remarks.
Okay. Well, thank you very much for taking the time to join us here today. Hope we were able to shed a little bit of light on things here at Hapag. Again, thanks for taking the time. If you have any further questions, please reach out to us any time, and we'll try to respond to you as good as we can. Thank you. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.