March 28 (Bloomberg) -- Hamburg, Europe’s second-largest container port, is poised for a rise in cargo volumes in coming years after one of the final hurdles to the ninth major river dredging in the port’s 1,000-year history was surmounted.
The deepening of the Elbe River’s navigation channel to allow bigger ships, delayed for years over environmental, agricultural and safety concerns, was approved by the German state of Schleswig-Holstein on March 13. Hamburg and the European Commission have already given a go-ahead to the project; only the state of Lower Saxony still has to approve it.
The dredging would be good news for Hamburger Hafen und Logistik AG, which handles more than two-thirds of the containers in Hamburg. A deeper Elbe would allow ships to carry more containers when they call at Hamburg’s port, helping increase Asian cargo volumes, and make vessels less dependent on the tide. That would lower costs and increase profit margins.
“The dredging is important in the long term so that Hamburg can remain a hub for the big ships coming from Asia, and for the competiveness of Hamburg,” Oliver Drebing, an analyst at Srh Alsterresearch AG in Hamburg, said in a phone interview. It is “good for HHLA’s profitability and will have a positive effect on its margins.”
Drebing said he had “no doubt” that a compromise will be found to ensure the safety of riverbank levees and protect Lower Saxony fruit growers, issues that have troubled state leaders. About 150,000 people in the Hamburg metropolitan area, which includes parts of Lower Saxony to the south and Schleswig-Holstein to the north, rely on the port for employment, according to the city’s website.
Hamburger Hafen shares, which have gained 8.4 percent in Frankfurt trading so far this year, climbed 3.4 percent on March 13 after Schleswig-Holstein approved the dredging. They closed at 25.7 euros ($34.27) on March 27. Drebing, who has a buy rating and a share-price estimate of 40 euros on HHLA shares, says he probably will increase that if Lower Saxony approves the dredging project.
Depth-related shipping delays cost HHLA 25 million euros every year, Christian Cohrs, an analyst at M.M. Warburg & Co. in Hamburg, wrote in a note on March 22.
Hamburger Hafen spokesman Mark Kruempel declined to comment on how the dredging of the Elbe would affect the company and when it estimates that the project will begin. HHLA plans to report earnings for 2011 and an outlook for 2012 on March 30.
Hamburg, Germany’s second-largest city, has been a merchant hub for about 1,000 years. Once a member of the Hanseatic League, it is home to Hapag-Lloyd AG, the world’s fifth-largest container shipping company, and Hamburg Sued, No. 12. Hamburg regained its position as Europe’s second-biggest container port last year, after Rotterdam, as trade with Asia and the countries around the Baltic Sea helped it overtake Antwerp.
The city of Hamburg forecasts that container volumes in its port may triple to about 25 million standard containers by 2025. The increase will be helped by a deeper Elbe, a new container terminal at Steinwerder and planned investments in the city’s and the port’s infrastructure, according to Jens Meier, the chief executive officer of the Hamburg Port Authority.
Dredging the Elbe will allow ships with a maximum draught of 14.5 meters (47.5 feet), or most of the vessels with capacity of 10,000 standard containers, to navigate the Elbe at high tide, compared to the current maximum draught of 13.5 meters. The world’s largest container ships, which can carry 18,000 boxes, still won’t be able to call at Hamburg at full capacity.
A failure to dredge the river may cause Hamburg to lose cargo to Rotterdam or the new German deep-sea container port being constructed in Wilhelmshaven, each of which can handle the world’s largest container ships at full capacity.
“The deepening of the Elbe is essential for Hamburg to remain one of the hubs in Europe,” said Max Johns, one of the three directors of the Hamburg-based VDR shipping association, which represents German shipping companies including Hapag-Lloyd and Hamburg Sued.
The size of container ships has more than doubled over the past decade, according to Paris-based Alphaliner, a shipping-industry consultant.
The fleet of container ships larger than 8,000 standard boxes will grow 27 percent this year, 21.8 percent in 2013 and 11.5 percent in 2014, based on current orders, Neil Dekker, head of container research at London marine consultancy Drewry Shipping Consultants Ltd., said in an e-mail on March 23.
“The dredging is important to keep up with the other leading seaports,” said Rico Luman, an economist at ING Groep NV in Amsterdam. It is also needed to “avoid missing future opportunities,” to aid cargo development and to strengthen Hamburg’s position as a hub for the Baltic Sea countries and Russia, he said.
A.P. Moeller-Maersk A/S, owner of the world’s largest container line, forecasts that global demand for seaborne containers will grow as much as 6 percent this year. The containers arriving at European ports from countries east of the Suez Canal probably will grow almost 40 percent to 20 million standard boxes between 2011 and 2021, according to London-based Box Trade Intelligence, which monitors 20 global trade lanes.
While Europe’s sovereign debt crisis may threaten that growth, obstacles also remain for Hamburg to dredge its river. Even if Lower Saxony agrees to the project, local people still have a right to challenge the plan in court.
Saltwater and Fruit
Warburg’s Cohrs, who rates HHLA sell and has a 12-month price estimate of 21 euros, forecasts that the deepening of the Elbe will be delayed until the summer of 2013, partly because of the time needed for legal proceedings.
Lower Saxony, whose leaders are concerned that a deeper river and larger ships may threaten levees and release more saltwater into the Elbe, damaging fruit crops on its shores, has not yet made a decision, state spokeswoman Silke Schaar said. While the official deadline passes March 31, the state may require more time to reach a decision, she said.
“The most important thing is that Lower Saxony approves the deal,” Stefan Kick, an analyst at Silvia Quandt Research GmbH in Frankfurt, said in a phone interview. “The question of the dredging of the River Elbe is very important for Hamburger Hafen und Logistik because they need to get bigger container ships into the harbor and be able to handle them without having to rely on the tide.”
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