- Hapag CEO rules out buying stricken South Korean company
- Short-term rate hike may help Hamburg liner in second half
The collapse of Hanjin Shipping Co. will probably spark fresh consolidation among container lines as they attempt to ride out the shock waves buffeting the industry, Hapag-Lloyd AG Chief Executive Officer 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 in an interview in Hamburg on Tuesday. “It will change behavior,” with some participants now assessing whether it might not be better to “team up,” he said.
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, doesn’t plan to buy the Asian company or any of its vessels, now stranded at sea and various ports across the globe. Hapag-Lloyd is busy completing its merger with United Arab Shipping Co., 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 U.S. stock up for the Christmas shopping season. While the gain in freight rates in the wake of the collapse may boost Hapag-Lloyd’s revenue “a bit” in September and October, that alone won’t trigger a sustained recovery in the industry, Habben Jansen said.
Hapag-Lloyd shares slipped 0.6 percent to 18.50 euros at 9:34 a.m. in Frankfurt. The stock has gained 14 percent since Hanjin filed for court receivership on Aug. 31, though it still trades 7.5 percent below the Nov. 6 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 A.P. Moeller-Maersk A/S’s Maersk Line, in an industry that has witnessed the disappearance of five of the 20 biggest carriers in the past two years alone. Transactions included the combination of China’s two biggest liners and Hapag-Lloyd’s takeovers of Chile’s Cia. Sud Americana de Vapores SA in 2014 and UASC this year.
Whether or not Hanjin rivals will snatch up some of the 39 container ships owned by the South Korean company will depend on the strategy of the various vessel-sharing alliances, including Maersk’s 2M partnership with Mediterranean Shipping Co., Habben Jansen said. “The vessels will at some point go somewhere, but let’s not forget that many of the ships are still full” and financial obligations mean they can’t be easily acquired by other parties, he said.
Only a handful of vessels in Hanjin’s owned fleet are attractive for buyers, while several others are likely to be scrapped, Copenhagen-based SeaIntel Maritime Analysis said in a Sept. 4 report. About 40 percent 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 means Hapag-Lloyd has added “quite a lot of capacity” to its fleet, he said.
The economies of scale will help to bring down debt that has nearly doubled to $7.1 billion as a result of the takeover, while UASC’s recent investments in several new large vessels will keep capital expenditure at the combined entity to a minimum in the next couple of years, the CEO said.
“It is very clear that the number is going to come down by several hundreds of millions of euros a year within the next couple of years, how quickly depends on the freight rates and other factors,” he said.
Habben Jansen expects Hapag-Lloyd’s transport container volume to grow in line with the market, which will probably be 2 percent to 3 percent this year.