• Dr Ottmar Gast, chairman of Hamburg Süd’s executive board

29.06.2015 By: Björn Helmke

Artikel Nummer: 10677

«Extending the Panama Canal will make a radical difference»

The economic downturn in the South American trade, Hamburg Süd’s main operating range, has forced the German shipping line to take corrective measures. The ITJ spoke with chairman Dr Ottmar Gast about the line’s entry into east–west trades and the integration of CCNI.

Dr Gast, Hamburg Süd was in the black in 2014. Your transport volumes grew by around 2%, and sales declined by 1%. Are result and growth satisfying, in your view?

In absolute terms we are not satisfied with our progress, because it does not correspond to what we had planned. We have to look at the matter in the context of overall developments in those markets that are relevant for us, however. Quantities developed worse than expected there, as the economies concerned were weak. In this environment we succeeded in holding our market share, and even of minimally improving it. As for our profit­ability: we are not satisfied with that ­either, because we did not attain the figures we had pencilled in. Compared with other results achieved in the industry we are doing rather well, however.


Looking at the annual results across the entire industry shows that the strongest lines in terms of volumes also generated good profits – at least amongst those that publish their results. Size seems to be becoming the defining factor in a company’s ability to compete. How can Hamburg Süd counter this trend?

In the past the major players were not always able to make use of the economies of scale that they theoretically commanded. Some enterprises have been able to position their organisation more efficiently in the last two or three years, though, so that they can now actually benefit from their size.


Hamburg Süd has always been very fast and flexible. We have a good manage­ment team and a very good reputation in the market, based on the quality of our services. In many a field we have done a better job on a few matters than our competitors on average – for example in container optimisation or yield management. That is why we make a profit.


You recently took over CCNI. How far has the integration of the line advanced, and what are the hurdles you face?

At the end of March we closed the take­over of CCNI’s container liner activities, and we have already restructured the essential IT systems. We have also integrated CCNI’s containers into our pool. Personnel ­issues have largely been resolved; we have decided who will play what role in the new combined organisation. Matters are developing satisfactorily. I am also under the impression that our volumes are stable, which means that we have hardly suffered any losses as a result of the takeover.


How has your cooperation with UASC been going?

That is not as big a challenge as the takeover of CCNI. We are only collaborating in a slot-exchange agreement there after all; but it is being handled professionally and is progressing very smoothly.


This cooperation deal also sees you enter east–west trades. Do you not think that, in the light of the size and the intense competition in that particular market, you are a little late there?

I believe that every market is tough today; just look at the freight rate developments in the various sectors. At the moment we are registering freight rates in the trade from Asia to the South American east coast that are as low as the catastrophically depressed rates from Asia to Europe. Do not forget that the costs in our core trade are higher, because the ships deployed there are not as large and the terminals in South America are mostly more expensive to use. Other lines sought a slice of the South American business two or three years ago, because they hoped to earn some easy income there thanks to the strong regional growth. Some met with quite some surprises. Now the sector is as competitive as the east–west trades. This used to be different.


What can you offer your clients in the east–west trade that others cannot?

Customer service and quality, both at the interface between clients and carriers and in terms of schedule reliability. Of course we have only rather limited influence on the latter, as long as we do not operate our own system there. But our staff’s excellent know-how stands us in good stead in east–west ranges too, as do our reliable information, top-quality order processing and documentation.


The extended Panama Canal is due to be opened in the near future. Do you expect any revolutionary ­effects on the market and on your business?

Revolutionary is too big a word. But the measure will make a radical difference. If the canal authority does not set unrealistically high transit fees, then larger ships – that is vessels that previously could not pass through the canal – will be deployed more frequently. The category of ships up to about 12,000 or 13,000 teu will become exceedingly important. This will result in new sailing schedules and in services being configured completely differently.


12,000 or 13,000 teu: would that be the size that you want to aim for in your fleet?

Could be. But of course you have to consider what the capacity and demand situation for this size of vessel is. It will be interesting to observe what happens when more and more large ships with 20,000 teu slot capacities are deployed in the Europe–Asia trade, and today’s 10,000 to 12,000 teu vessels are withdrawn from there. We have to beware that we do not manoeuvre ourselves into a situation where overcapacity rules. But we have not decided on this issue yet anyway.


We have come to my last question. When will the crisis in the shipping industry end?

I do not believe that this is a typical crisis, with repeated hog cycles, as we have frequently experienced them over the past few years and decades. A type of industrialisation has set in in the container shipping segment. For various reasons a certain level of overcapacity is inherent in the system.

Thus I do not harbour the illusion that we will overcome this so-called crisis any time soon. We may benefit from transitory relief, such as the recent decline in the price of bunker fuel. But I am afraid that those are only rather temporary manifestations.         



Dr Ottmar Gast, chairman of Hamburg Süd’s executive board, talks to the ITJ about his line’s profitability.

Photos: Hamburg Süd