Falling rates drag on Hamburg Sud revenue

Falling rates drag on Hamburg Sud revenue

Hamburg Sud's parent Oetker Group wanted out of the shipping industry because of the costs associated with remaining competitive amid continous consolidation.

Hamburg Sud’s revenue declined 7.2 percent in 2016 as weakening freight rates overwhelmed a similar rise in the German shipping line’s container traffic.

The carrier, which is being acquired by Maersk Line, generated revenue of 5.6 billion euros ($6.3 billion), down from just more than 6 billion euros in 2015, when sales soared almost 17 percent year-over-year on the takeover of Chile’s CCNI.

Germany’s second-largest container carrier after Hapag-Lloyd boosted traffic by 7.2 percent to 4.4 million TEU from 4.1 million TEU a year earlier.

Average freight rates declined by about 15 percent from the previous year owing to “continuing overcapacities.”

Hamburg Sud, a subsidiary of the family-owned Oetker pizza-and-beer to hotels-and-banking conglomerate, does not publish profit and loss figures.

Investment slumped to 77 million euros from 437 million euros a year earlier because “in view of the weak cargo growth, additional ship orders were not required” with the last of the 10,000-TEU “Cap San” class vessels delivered in 2016.

“In view of rising overcapacities and the low global growth in cargo, in part caused by the crisis in most South American economies, the Hamburg Sud Group, like other liner shipping companies, was not able to achieve a satisfactory result in this extremely difficult and challenging market environment,” the Oetker group said.

The carrier’s bulk shipping unit was hit by charter rates temporarily falling to their lowest levels since the global financial crisis in 2009, mainly owing to lower Chinese imports of coal and iron ore.

The Oetker group said it had decided to sell Hamburg Sud to Maersk “since active participation in the currently ongoing consolidation process of the (shipping industry would require an even higher capital investment, and would be severely disruptive in terms of risk allocation within the Oetker Group.”

Maersk is the “ideal” partner for Hamburg Sud, the group said.

The 3.4 billion euro acquisition is expected to close at the end of the year after all regulatory approvals have been issued.

Maersk took a big step toward securing those regulatory approvals through its sale of East Coast South America (ECSA) cabotage carrier Mercosul Line to CMA CGM.

The CMA CGM deal was necessary for Maersk to go ahead with the Hamburg Sud deal because Hamburg Sud owns Alianca Logistica, the most dominant carrier in the ECSA coastal trade, with a market share of 55 percent. Had Maersk maintained control of Mercosul Line and gained Alianca Logistica via Hamburg Sud, the world’s largest container line would have controlled between 75 and 80 percent of the ECSA market.

Contact Bruce Barnard at brucebarnard47@hotmail.com.