CEO says there are no current talks with CMA CGM; major shareholder Kühne does not want company to be taken over by French carrier.
The world’s third-largest container carrier, France’s CMA CGM, has approached shareholders of Germany’s Hapag-Lloyd about a possible merger, according to a Reuters report, but has been rebuffed.
Reuters reported Monday “three finance sources with knowledge of the matter, who declined to be named due to market sensitivity, said CMA CGM had initiated discussions in recent months with Hapag-Lloyd, which is ranked fifth globally, to look into some form of share merger of the two groups.”
A CMA CGM spokesman said the company had no comment on the report
Nils Haupt, a spokesman for Hapag-Lloyd, said Rolf Habben Jansen, the chief executive officer of Hapag-Lloyd, said during the company’s annual meeting on Tuesday that there are currently no talks between the two companies, but said the company’s 2017 merger with the United Arab Shipping Company “has significantly strengthened our competitive position. We achieved good results for the last financial year and have made a solid start to the first quarter of 2018. Our shareholders have kept their faith in us and supported us during the difficult times as well. So I am delighted that we can pay a dividend for the last financial year.”
Habben-Jansen also said Hapag-Lloyd does not anticipate major takeovers in the industry in the coming year.
Haupt said the Hamburg radio station Norddeutscher Rundfunk (NDR) reported Klaus-Michael Kühne, who controls 25 percent of the company’s shares and is also the majority owner of Kühne + Nagel, said he was approached by CMA CGM, but that he doesn’t want Hapag-Lloyd to be taken over by the French carrier, and to the contrary, he said Hapag-Lloyd should take over the French.
Kühne questioned the need for Hapag-Lloyd to issue a profit warning last week. But Habben Jansen said it was necessary given high fuel prices and the direction of freight rates, though he also said the outlook might be more positive in three months.
Habben-Jansen told shareholders, “We will secure our competitiveness in the short term through accelerated cost management and greater efficiency. In the medium term, we will further advance digitalization efforts at Hapag-Lloyd and continue to strengthen our position as a quality service provider. We must also respond with increasing agility to a dynamic environment and geopolitical developments.
“Stricter limits on sulphur in fuel from 2020 onwards will pose a major challenge for the shipping industry, as we will have to simultaneously use new technologies and fuels which are currently only being trialed or are not sufficiently available.”
In an interview with American Shipper last month, Pyers Tucker, the senior director of corporate development at Hapag-Lloyd, said during the past decade container shipping “has been all about getting bigger as fast as you bloody well can, nothing else mattered.”
“The logic for doing that was simply that by increasing your scale you massively reduced your unit costs,” he explained.
But today he said the senior leadership of Hapag-Lloyd believes the industry is at an “inflection point and that to use the past as an indicator or a predictor of the future actually is a broken logic.”
“We reckon that if we were twice the size we are today it would only reduce our unit costs by between 2 percent and 4 percent.”
CMA CGM has built some of the largest containerships operating today, but Tucker indicated Hapag-Lloyd has also become skeptical about their benefits.
While some analysts claim the slot cost advantage of a 20,000-TEU ship is “something on the order of 20 to 30 percent,” he said, “Our math says that the real slot cost advantage is actually more like 5 to 7 percent, and that is on the assumption that the ship is full. And those ships are very limited in their flexibility of the way that you sail them.
“As far as we can see and tell, the big ships and the ship system in which the big ships are … they have significantly poorer profitability than most of our other ship systems,” he said. “One of the reasons for that is the terminals struggle massively to handle the big ships.”
He says a 20,000-TEU containership is wider and has more containers on deck than one with capacity for 10,000 to 13,000 TEUs, but not that much longer.
“That means you can’t get twice as many cranes alongside,” he says, and it takes longer containers to be loaded and discharged because the crane’s spreader bar must travel a longer distance both horizontally and vertically for each container move. Productivity is much better on the smaller ships with 10,000- or even 15,000- TEU capacity than on ships with capacity of 20,000 TEU or more, he said.
When it acquired United Arab Shipping Co., Hapag-Lloyd acquired six ships with 19,000-TEU ships and 11 with 15,000-TEU capacity, but Tucker said the company has no plans to acquire more ships of any size and would prefer to have no 20,000- TEU ships and keep as few as possible.
“The only reason we at Hapag-Lloyd now have some big ships is because we are in an alliance and our partners have some big ships. … If you’re sailing in a loop with big ships and you’ve got one of your alliance partner’s 20,000-TEU ship coming in, and a week later another partner’s 20,000-TEU ship is coming in and then a week later it’s a Hapag-Lloyd ship and it’s 15,000-TEU — that’s just an organizational nightmare.”
Hapag-Lloyd does not see major mergers ahead
