Bond rating agency Moody’s Investors Services said the sale of Hanjin’s interest in Pier T, which accounts for 30 percent of the port’s revenue, is “credit positive.”
Officials at the Port of Long Beach are highlighting the port’s flexibility and financial strength as they face challenges presented by changes in the container shipping industry.
During a “State of the Port” event last week, Lori Ann Guzmán, the president of the Long Beach Board of Harbor Commissioners, said the bankruptcy of Hanjin Shipping, a decline in cargo volumes, and container carriers changing up alliances has “tested us.” Guzmán said the port has addressed those issues head on and demonstrated its ability to adapt.
Terminal Investment Limited (TIL), an affiliate of Mediterranean Shipping Company (MSC), said today the acquisition of Hanjin Shipping’s 54 percent interest in Total Terminals International (TTI), which operated the largest container terminal at the Port of Long Beach, has been completed. TIL now owns 80 percent of TTI, while Hyundai Merchant Marine (HMM) owns the remaining 20 percent.
TTI leases and operates Pier T at the Port of Long Beach and Terminal 46 in Seattle. TIL’s purchase includes the associated terminal equipment leasing company Hanjin TEC Inc. MSC owns 65 percent of TIL, while Global Infrastructure Partners owns the remaining 35 percent.
TIL President Alistair Baillie said, “Our focus throughout the acquisition consultation has been, and will continue to be, rebuilding the business and servicing the needs of our affiliated shipping line MSC, its 2M partner Maersk, and our new joint venture partner HMM.”
HMM Chief Financial Officer Kim Choonghyun said the Korean shipping company “is pleased to have concluded the process for securing investment in TTI. We very much look forward to using TTI’s terminal in Long Beach, and enhancing our transpacific shipping operations to the benefit of our customers.”
Bond rating agency Moody’s Investors Services said the sale of TTI is “credit positive” for the Port of Long Beach because it “preserves the highly valuable lease of the Pier T container terminal through 2027, strengthens the corporate guaranty securing the lease, and places Pier T with an experienced and financially stable terminal operator affiliated with a carrier network (operated by Maersk, MSC and HMM) that controls 21 percent of the transpacific ocean shipping market.
“The lease of Pier T accounted for a significant 30 percent of Long Beach’s revenues for fiscal 2015 (which ended Sept. 30, 2015),” Moody’s added. “A failed bidding process or liquidation of TTI would have been highly disruptive for Long Beach, with its only immediate recourse to invoke the financial guaranty provided by the bankrupt Hanjin Shipping. Upon the change in ownership, TIL will provide a guaranty securing the full lease at Long Beach and a guaranty securing two years of rent payments at Seattle.
“The leased terminals are now in stronger hands, both financially and operationally, which is important given that the transpacific container shipping market is highly competitive and available cargo volume is increasingly concentrated among large shipping alliances with the negotiating power, network reach and economies of scale to outcompete smaller carriers,” the bond rating agency added.
The new ownership of TTI “offers the potential for growth at Long Beach,” Moody’s said. “Despite being the largest shipping alliance globally, 2M was underrepresented in the transpacific market. But Maersk’s acquisition of Hamburg Süd and 2M’s slot-sharing agreement with HMM, both finalized in December 2016, provide the alliance partners with approximately 21 percent of the transpacific market.”
Maersk’s sister company, APM Terminals, operates Pier 400 at the adjacent Port of Los Angeles, and MSC already leases Pier A at Long Beach.
Speaking at the State of the Port event last week, Port of Long Beach Interim CEO Duane Kenagy noted how the Port of Long Beach handled 6.8 million TEUs of container cargo last year, a 6 percent decline from 2015.
“Now we face uncertain trade policies,” Kenagy said, and a forecast of weak global trade.
“It is clear only the most efficient and strongest will survive,” he said. “We must maintain our financial strength and flexibility to rapidly respond to our changing business environment.”
While saying “financial prudence is critical now more than ever,” Kenagy highlighted projects such as Long Beach Container Terminal at Pier E, which began operations last year and where a second phase of construction is underway.
When completed, Kenagy said the highly automated facility, operated by Orient Overseas Container Line (OOCL), will have the capacity to handle 3 million TEUs a year.
He also highlighted progress on building a new Gerald Desmond Bridge, which will allow larger ships to enter the port’s North Harbor area; and a proposed rail support facility at Pier B, which would provide terminals with a staging yard where they could join blocks of cars into full-length trains.
Port of Long Beach highlights financial strength, flexibility
