Business Day

More ship­ping merg­ers likely as Han­jin sinks

- NI­CHOLAS BRAUTLECHT Ham­burg Business · Supply Chain Management · Industries · Hanjin · Hanjin Shipping · Germany · United States of America · Frankfurt · Hapag-Lloyd · United Arab Shipping Company · Mxller-Maersk · Mediterranean Shipping Company S.A.

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

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