More shipping mergers likely as Hanjin sinks

THE collapse of Hanjin Shipping Company would probably spark fresh consolidation among container lines as they attempted to ride out the shock waves buffeting the industry, Hapag-Lloyd CEO Rolf Habben Jansen said.

“A lot of people hadn’t expected the difficulties for Hanjin in the magnitude we have seen them,” the CEO said on Tuesday. “It will change behaviour”, with some participants now assessing whether it might not be better to “team up”.

Germany’s No 1 carrier, which has used mergers to bring down costs and counter the slump that has shaken shipping for the past eight years, does not plan to buy the Asian company nor any of its vessels, now stranded at sea and various ports across the globe.

Hapag-Lloyd is completing its merger with United Arab Shipping Company (UASC), which it aims to do by the end of 2016.

“We better make a success of that first,” the CEO said.

Hanjin’s demise has disrupted global supply chains as stores in Europe and the US stock up for the Christmas shopping season. While the gain in freight rates after the collapse might boost revenue at Hapag-Lloyd “a bit” in September and October, that alone would not trigger a sustained recovery in the industry, Habben Jansen said.

Hapag-Lloyd shares slipped 0.6% to €18.50 in Frankfurt. The stock has gained 14% since Hanjin filed for court receivership on August 31, though it still trades 7.5% below the November 6 2015 initial public offering price.

“We are not a big partner of Hanjin, so the impact on us is very limited and manageable,” Habben Jansen said.

A new wave of mergers may bolster the position of the biggest carriers, led by AP MoellerMaersk’s Maersk Line, in an industry that has witnessed the disappearance of five of the 20 biggest carriers in the past two years.

Whether Hanjin rivals will snatch up some of the 39 container ships owned by the South Korean firm would depend on the strategy of the various vessel-sharing alliances, including Maersk’s 2M partnership with Mediterranean Shipping Company, Habben Jansen said.

“The vessels will at some point go somewhere, but … many of the ships are still full” and financial obligations meant they could not be easily acquired by other parties.

Only a handful of vessels in Hanjin’s owned fleet were attractive for buyers, while several others were likely to be scrapped, SeaIntel Maritime Analysis said in a September 4 report.

About 40% of the ships are in the “less attractive” smaller segments, according to the report. “With average ages of close to 10 years, these vessels are likely not going to be very fuel efficient,” SeaIntel said.

The analysts singled out four bigger vessels with a capacity of 13,000 standard 20-foot containers as the “most interesting for a potential buyer”.

“We will look at the vessels like everyone else, but our primary objective is not to grow faster than the market,” Habben Jansen said. The UASC deal meant HapagLloyd had added “quite a lot of capacity” to its fleet, he said.

The economies of scale would help cut debt that has nearly doubled to $7.1bn.

We will look at the Hanjin vessels like everyone else, but our primary objective is not to grow faster than the market