Maersk cements lead in container shipping

Singapore

MAERSK Line's 3.7 billion euro (S$5.5 billion) acquisition of Hamburg Sud is propelling the container shipping giant - already the world's No. 1 carrier - further ahead of its competitors in the relentless race for market share.

And for Singapore, a bigger Maersk would only mean higher box volumes here, according to the company's chief commercial officer Vincent Clerc.

"Our strategy is to move away from being a conglomerate present in different industries to being a company focused on transportation and logistics," Mr Clerc said in an interview with The Business Times on Monday.

"With the acquisition of Hamburg Sud, we are really cementing our leadership position in container transportation, and we are building our presence in key markets like Latin America and Oceania, where Hamburg Sud has historically been strong."

Maersk ranks as the largest container shipping line worldwide with 646 vessels, while Hamburg Sud is the seventh largest, with 116 ships.

Together, they now hold an 18 per cent share of global capacity - up from Maersk's 15 per cent share prior to the acquisition - comprising 762 container vessels with a combined container capacity of about four million twenty-foot equivalent units (TEUs).

In comparison, Mediterranean Shipping Co, the world's No. 2 player, has a share of 14.6 per cent as at Dec 1, followed by CMA CGM at around 11.6 per cent, according to shipping data provider Alphaliner.

Maersk also expects to reap operational cost savings in the range of US$350 million to US$400 million annually for the first few years, starting 2019.

With the acquisition done, Maersk will now move to reflag most of Hamburg Sud's vessels, including some of the German-flagged ships, to either Denmark or Singapore.

This exercise will likely be completed over the coming months, said Mr Clerc, although the company has yet to decide on the exact number of vessels that will fly each flag.

Maersk has investments in Singapore totalling over US$12 billion, including 46 vessels and rigs under the Singapore flag.

"For a long time, we've built very deep relationships in Singapore, we've had a lot of activities here - it's a place that makes sense for us," said Mr Clerc.

"And as we integrate Hamburg Sud and continue to grow as a company, Singapore will benefit with an increase in numbers for the transshipment moves happening here," he added. All of Hamburg Sud's transshipment activities for South-east Asia will remain in Singapore, unchanged.

Already, Maersk's share of transshipment volumes through Singapore has grown significantly in recent years, even as the shipping line continues to utilise its dedicated berths at Malaysia's Tanjung Pelepas port. Singapore handled about 4.5 million TEUs of Maersk containers last year, up 69 per cent from the 2.7 million TEUs seen in 2013.

"Singapore has traditionally been one of the real pivot areas for trade and shipping, and South-east Asia is the area in Asia that is seeing the strongest growth right now. Obviously, Singapore is the natural transshipment hub for South-east Asia," noted Mr Clerc.

That said, Maersk's acquisition of Hamburg Sud will only have "a minor impact" on box traffic coming through Singapore since the German firm is a relatively small carrier in the South-east Asia region, said Tan Hua Joo, executive consultant of Alphaliner.

On the buyout, Mr Clerc said Maersk has chosen a "light- touch integration" approach, where it will maintain and run Hamburg Sud as a separate commercial entity, with no changes to the frontline.

"Hamburg Sud is a company that has a long and proud history, and it stands for a lot (in terms of business) in Latin America especially, and in Oceania. We think we can build on this brand (by) maintaining what makes Hamburg Sud different and preserving it, so the customers of Hamburg Sud can continue to get the services they've been used to getting from the company," he said.

Such an approach is poles apart from what Maersk had implemented with P&O Nedlloyd back in 2006, when it bought over the company. "We decided to integrate everything at that time, which meant a lot of changes for the customers at P&O back then, who had chosen P&O for a certain reason and ended up getting a Maersk service. It took some time for us to find the right formula to make that happen," Mr Clerc recalled.

"By taking this 'light-touch' approach with Hamburg Sud, we can preserve the two brands and create a better product overall for our customers."