The German shipping sector concentrated in the north in Hamburg is at a historic low point, and one might as well give up looking for opportunities in the sector.
This is the current bleak view from equity fund Lloyd Fonds when it comes to the shipping sector in Germany, which was flourishing big-time before the financial crisis, and which after the crisis continued to offer certain opportunities, albeit on a smaller scale than before.
Values are being distributed, and the sector may have to fall even further"
"We are witnessing an endgame for shipping in Hamburg right now. Values are being distributed, and the sector may have to fall even further. We don't know when there'll be a new wave in shipping, but right now it's like the time after 2011 when we suddenly saw the market change quickly," CEO Torsten Teichert tells ShippingWatch
This development makes the equity fund refrain from investing in shipping right now, and in recent years the number of ships the company owns or operates has dropped from 88 in 2010 to 32 vessels last year.
Sale of major bank
That not just Lloyd Fonds' own investments, but that the very shipping sector in Hamburg is dissolving, or at least changing its shape, is evidence by numerous examples.
Teichert points to factors such as the sale of HSH Nordbank, which according to the latest reports will be picked up by either US or Chinese buyers. The bank has been one of the biggest players in the Germen shipping sector through the ages, but since the financial crisis its large shipping portfolio has weighed the bank down significantly.
Another example is Rickmers Group, which is working to restructure the traditional carrier whose roots date back almost 200 years, but these efforts to salvage the shipping group mean, for instance, that the owner family – represented by Bertram C. Rickmers – had to surrender its chairmanship of the group.
This rescue attempt has already been met with resistance from several bondholders, and there are fears that the aftermath could be ugly.
The sale of Hamburg Süd to Maersk Line is yet another sign of the changes taking place in Hamburg. Though the carrier's headquarters will remain in the city, and many employees will keep working there, the fact that the carrier is now Danish-owned also impacts Hamburg's shipping cluster.
German capital manager MPC Capital raised USD 100 million earlier this year, through private as well as institutional investors, earmarked for investments in company MPC Container Ships AS, which will specialize in container vessels in the 1,000 to 3,000 teu range. Teichert does not see big gains from this prospect or the amount.
"MPC Capital's initiative could be seen as the very first stages of a recovery in shipping, but I wouldn't bet on it. The ones doing something in shipping in Germany right now, I view them as opportunists who can be compared to day traders. They're taking on really high risks in severely struggling market," says Teichert.
Lloyd Fonds currently sees itself as a passive rather than active investor in the shipping sector.
The company, which also invests in real estate, and manages a combined portfolio of EUR 1.4 billion, attempted just a little over two years ago to turn itself into a pure play shipping company by investing in vessels from KG companies, with plans of a IPO at a later stage.
Time has run out for that opportunity, and we could in fact doubt whether the shipping markets will return to their former strength"
An attempt that failed and which Lloyds Fonds has since then completely abandoned.
"Time has run out for that opportunity, and we could in fact doubt whether the shipping markets will return to their former strength. We don’t project that the market will turn around this year, and perhaps not even next year," says Teichert.
The latest results from Lloyd Fonds, which only publishes annual results, showed a net result of EUR 3.2 million. In relation to the publication of the figures, the company proposed dividend payment of EUR 0.16 per share, up from EUR 0.07 per share the year before.
English Edit: Daniel Logan Berg-Munch