Wednesday , 19 September 2018
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China approves Maersk Line’s acquisition of Hamburg Süd
Closure of the deal is expected by the end of 2017

China approves Maersk Line’s acquisition of Hamburg Süd

Maersk Line’s proposed acquisition of Hamburg Süd has received approval from China’s ministry of commerce subject to capacity limitations on certain routes as well as the German carrier no longer taking part in specific vessel sharing agreements (VSAs).

Maersk Line has committed to reducing its combined capacity with Hamburg Süd for shipping reefer containers on the Far East Asia – West Coast of South America trade route from the current level of 45-50% to 34-39%.

The approval is also subject to Maersk Line not extending Hamburg Süd’s membership of a VSA currently active on the Far East Asia – West Coast of South America trade route and the Danish line terminating Hamburg Süd’s membership of a VSA currently active on the Far East Asia – East Coast of South America trade route on the earliest date permitted.

Maersk Line further commits, not to enter into vessel sharing agreements with its main competitors within five years of closing.

The committed changes will become effective after closing of the proposed acquisition, expected before end of 2017.

Søren Toft, Maersk Line’s chief operating officer, told CM that synergy planning is well underway with Hamburg Süd volumes to be moved to APM Terminals (APMT) facilities where capacity is available.

Santos, the largest port on the East Coast of South America, offers a particular challenge with APMT part of a joint venture running its largest terminal while Hamburg Süd is the biggest customer of the second busiest facility.

“Santos right now is quite full,” said Toft. “That would be a market where it’s going to be difficult to [move volumes]. Obviously we’re not going to force volumes into an APMT facility if they can’t handle it.

“The acquisition of Hamburg Süd starts with keeping the customers and keeping the business. That’s the reason why we’re buying the company and that’s where the centre of attention lies. When we keep the customers, our likelihood of generating the synergies that we have promised and a key part of the business case will also go up.”

Toft also noted the company’s optimism for the remainder of the year due to good “fundamentals” with demand growth in the range of 4-5% exceeding original expectations.

Maersk’s third quarter results disappointed CEO Søren Skou as volumes fell 2.5% and the carrier lost market share on both North – South and East – West trades.

Toft attributed the loss of volumes as well as a 3.9% rise in unit cost at fixed bunker price largely to the NotPetya cyber attack, which hit on June 27.

The attack led to increased “SG&A costs because we spent more on IT and so on and also [higher] terminal costs because the disruption meant that we had more handlings than we normally have to move our business,” he noted.

With carriers such as MSC and CMA CGM ordering new mega-vessels, Toft indicated mild concern over the potential for future excess capacity.

“If you look at the history of our industry, it’s always a concern,” he stated. “It is true that a lot of the idle capacity has been reactivated. We were in the third quarter as low as 2% idle capacity, which is an optimum because there are always ships are idle for one reason or the other. But it came down from around 7% in Q4 last year.”

With Maersk set to receive six 20,000 teu vessels and five 15,000 teu ships next year, Maersk has no “need” for new orders, he added.