Exodus from an unpromising land
It is not the Roman Emperor Augustus, who ruled when Jesus Christ was born, conducting the census this time. Consultants, rather, are busy counting how many shipping lines there are left. One more went down a few days ago, when Hamburg Süd was sold to Maersk. Alphaliner sees twelve major lines operating in 2017. Independent entities probably only have limited options: grow, fold – or accept state support.
Where did that take place again? That’s right, in distant Taiwan, where the government presented an aid package for ailing container shipping lines in mid-November. After the lines Yang Ming and Evergreen reported losses of around USD 173 and 50 million respectively for the third quarter of 2016, the government took action to support the Nos. 9 and 5 of the world’s shipping lines in terms of their available container capacities (see also pages 14–15). Financial support worth approximately TWD 60 billion (USD 1.9 billion) is but one arrow in the authorities’ quiver, however. Cost cutting measures – included reductions in berthing fees – are also part of the overall programme.
According to the Taipei Times the country’s deputy minister for transport and communications, Wang Kwo-tsai, explicitly referred to Hanjin and South Korea as cautionary examples, saying that the national economy has to be spared a setback of those proportions (see also page 35). The container shipping industry is expected to sail back into the black in around two years, after all. So one could say that, in the post-Hanjin shipping crisis, this is the second Asian version of plan B.
The great solution
In Hamburg, in the meantime, the fall-back position has been taken up. The fact that there had been ongoing negotiations for the sale of Hamburg Süd to its strong competitor from north of the border had been the talk of the town for quite a while already, and not only in the northern German city. On 1 December it was then officialised that the main shareholder in the shipping line, the German company Dr. August Oetker KG, had agreed to “sell Hamburg Süd with all of its activities, subsidiaries and principal assets” to Maersk for an unnamed sum, as the firm’s media release revealed.
The fact that a preliminary contract has been signed and the due diligence process is still going on has led many an observer to conclude that the asking price will not be a spanner in the works. The only potential stumbling block is represented by the cartel authorities involved. The transfer is expected to be completed by the end of 2017. Then the world’s seventh-largest shipping line, which reported a 22% annual increase in its transport volume to 4.1 million teu and sales of EUR 6 billion in 2015, will have a new owner.
Maersk CEO Søren Skou said the move represents “a milestone” in the corporation’s history. Hamburg Süd’s commercial orientation, with a special focus on Latin America and Oceania, makes it a good geographical fit with the Danish line’s existing key trades.
The CEO also underlined the fact that the move creates an option for the future too. It is entirely possible that the Hamburg Süd and Aliança brands may be continued, as is currently planned. The latter came into the fold in 1996. It should be noted that in 2016, Maersk relocated the headquarters of its subsidiary Safmarine to Cape Town, having previously transferred it north from Southern Africa to Copenhagen in 2012. Not everything can be run centrally.
Facing a stiff breeze
The wording of the media release put out by Dr. August Oetker KG, which has owned a share of Hamburg Süd since 1936, represent something of a cold headwind. The key point cited in favour of the sale only mentioned the shipping industry’s difficult situation in passing. It focused, rather, on the fact that “active participation in the consolidation process currently taking place in the sector would entail an even higher capital requirement.” The company, having completed the takeover of the Chilean line CCNI in March 2015, is no longer willing to invest. It has, to put it bluntly, lost faith. So it has opted for plan C.
Other ways forward
Is the path chosen by Hamburg Süd really the only way forward? Hapag-Lloyd, headquartered on Hamburg’s Ballindamm, not far from Hamburg Süd’s base in Willy-Brandt-Strasse, has proved that there are alternatives – even though a merger of the two Hamburg-based lines was on the agenda for a short time a few years ago. After its merger with CSAV at the end of 2014 Hapag-Lloyd has continued to implement its strategic decision to expand, and only recently took over UASC. HL CEO Rolf Habben Jansen said that the aim is to “improve our competitiveness.” He believes in it. That’s more like plan A.
There would not appear to be much room left for manoeuvre for “independent” operators any more. Industry rumours have it that the Israeli line Zim (see also page 41) is also seeking a buyer. The spinning wheel of consolidation is not likely to slow down substantially any time soon.