Despite valiant resistance Hamburg Süd could not hold out against the consolidation across the sector. It is, therefore, no surprise that the Oetker Group have sold their shipping line to Maersk Line. It is also likely that the Oetker family, who own the line as part of the wider Oetker Group, were reluctant sellers.
Previously the family had resisted vigorous overtures from Hapag Lloyd, led by Klaus-Michael Kuhne. Personalities may have played a part in that refusal, however it is quite possible that the pain Hamburg Süd had been feeling from the downturn in the market had become so severe that it could no longer defy the inevitable. The company tacitly admits this, commenting that even though Hamburg Süd “has grown clearly in excess of the market and has financed the expansion of its network as well as the ship and container fleet largely from its own cash flow”, it had to sell because “active participation in the consolidation process of the sector currently taking place would entail an even higher capital requirement”, which was not sutainable.
The last comment is particularly telling. The emerging market structure seems to be moving towards very large global shipping networks, which of course will require very large capital assets. There are several implications of such a structure. Firstly, the entry barriers to container shipping may be becoming higher. Even allowing for the ownership options available to ship operators, fewer companies can access the billions needed to build such large networks. Fewer can manage them. This also may suggest that returns on capital may improve as the sector become less prone to smaller providers growing by undercutting larger rivals and thus prices may harden in the long term.
Certainly, Maersk Line’s grip on the container shipping market may tighten. Assuming that Maersk is able to retain all of Hamburg Süd customers it will claim an 18% market share. This is a strong position but it is unlikely that the line will become a ‘price maker’ just yet. The container shipping market still has some way to go in its restructuring.
Source: Transport Intelligence, 1st December, 2016
Author: Thomas Cullen