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Habben Jansen expects no more mergers and acquisitions

Regulators have marked the limit for container consolidation with strict conditions for Maersk Line’s acquisition of Hamburg Süd, says Hapag-Lloyd CEO, Rolf Habben Jansen. 6 or 7 major players are crucial for the market, he notes in an interview with ShippingWatch.

HAMBURG

"Mein Feld ist die Welt"

"The world is my oyster," it says written in marble in the impressive entrance hall at Hapag-Lloyd's iconic headquarters in downtown Hamburg.

This is also where ShippingWatch's interview with CEO Rolf Habben Jansen begins. The motto only seems to ring truer lately.

I do not expect much more consolidation to occur.

Rolf Habben Jansen CEO Hapag-Lloyd
A few years ago, the German carrier made a futile attempt to land the obvious solution, a merger with next-door competitor Hamburg Süd, to end up in a pan-continental shipping group with German, Chilean and Arab owners.

Today, Habben Jansen seems pleased with what he sees, although the group of shareholders is not necessarily streamlined. The aim, to gradually reap the benefits of the consolidation, is starting to pay off fully, he explains.

Adding to that, market fundamentals are encouraging with an expected growth of around four percent also in 2018 and, at least in the short term, a fleet growth which is not as alarming as only one or two years ago.

"So far 2017 looks pretty good and we are starting to capture synergies," says the pragmatic Dutchman and former Maersk exec when we leave the rustic building.

A third of synergies secured

The financial impact of the UASC merger, which was settled and sealed in May, is rendering the planned dividend already this year. One third of the annual savings of around EUR 400 million can be posted in the 2017 results, which - according to the CEO - is as promised. In 2019, the company will note the full effect. The development was reflected in the Q3 figures which Hapag-Lloyd published few days ago with a net profit of EUR 54,3 million.

With the CSAV merger in 2014, it can be said that Hapag-Lloyd spearheaded the consolidation which has transformed the entire container industry from a Top-20 to a Top-7 sector led by Maersk Line, MSC, CMA CGM, Cosco Shipping and Hapag-Lloyd.

What is also clear in the mind of Habben Jansen is that regulators have reached the limit of how much they will approve. At least for the time being. The sharp conditions imposed by the EU and the Chinese competitions authorities to green-light Maersk Line's acquisition of Hamburg Süd is more than just an indication that consolidation among the major players is complete.

A need for six-seven large carriers

Furthermore, Habben Jansen tells ShippingWatch, the six or seven power houses help to maintain sound competition going forward. Some competitors have argued that the process will only continue leaving three of four dominating container carriers in the market, however, Habben Jansen disagrees.

But the market probably needs five to seven large players, as is the case today

Rolf Habben Jansen CEO Hapag-Lloyd
"In terms of consolidation it is interesting what we have seen over the recent years. Before Hapag-Lloyd's merger with CSAV, everybody complained that the industry did not consolidate. Now there are six or seven major carriers left. I do not expect much more consolidation to occur. Regulators have become critical and we have reached a certain scale beyond which point it is difficult to reap significant synergies. We will probably see smaller players being purchased or merged with others. But the market probably needs five to seven large players, as is the case today," says the CEO.

Cosco Shipping's take over of OOCL this summer also underlined the Chinese ambition to expand its presence in the maritime industry worldwide. With a determined political and financial support, the huge Chinese conglomerates have embarked on a journey to acquire maritime assets in the entire logistics chain, including carriers and ports.

With the OOCL deal, Cosco Shipping is now ranking 4th, pushing Hapag-Lloyd one step behind. Among European competitors, the Chinese ambitions are contemplated with some trepidation and even regarded as aggressive or unfair, as state money and ambitions are factors driving the expansion.

Cosco is not special

Habben Jansen does not share the view that Cosco Shipping should constitute an extraordinary threat to the privately owned mostly European peers.

"It is clear that Cosco has a huge order book," he states referring to the 20 vessels in the pipeline which will hit the water in 2018 and 2019.

"But it is also clear that Cosco is a strong competitor like Maersk Line or CMA CGM. They all have strong shareholders with the ability to invest in their companies," he adds.

Are customers, the shippers, also enjoying the benefits of a consolidated, streamlined container industry? Reliability is at a low point and the formation of the alliances in April, with the subsequent reshuffling of networks, only seems to have worsened the product to transport a box from A to B.

"We also believe we can get better and need to ask ourselves what can be done for the customers instead of focusing on scale. Customers want stability and I think they are willing to pay an extra 20 dollars per container to achieve a better service," argues Habben Jansen.

In the latest quarterly report from SeaIntel, Hapag-Lloyd had a reliability of below 76 percent, or just above Maersk Line.

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