Battle about North Sea clients intensifies

The Swedish DFDS competitor on the routes between Sweden and England desperately needs big clients on new routes.

A textbook example that the present ship prices has reached a level making it relatively easy to open a new route.

This is how stock analyst Nikolaj Kamedula from SEB Enskilda identifies the fact that the competition on the North Sea between Danish DFDS and Swedish North Sea RoRo seems to have intensified on the Sweden-England routes.

“The central matter at issue is how many big clients North Sea can win over if the company can create a sensible business on the route”, Nikolaj Kamedula says.

German DB Schenker is mentioned as the only big client that NTEX/North Sea has succeeded in winning over.

Bought out competition

Since 24 January this year the newly established and NTEX-owned freight carrier North Sea RoRo has operated three weekly departures between Gothenburg and Killingholme in parallel to the DFDS route between Gothenburg and Immingham. The freight forwarder, NTEX, a former major client of DFDS, has never tried to conceal the fact that the initiative is a result of disagreements with DFDS on price fixing. According to Managing Director Thomas Ström, DFDS has been demanding prices between Sweden and England at a level which is 20-25 per cent higher than on any similar routes in Europe.

When NTEX disclosed the initiative in January, DFDS issued a stock exchange announcement revealing that the competition from North Sea would negatively affect the 2012 results. On this background, Nikolaj Kamedula estimated in January that the North Sea RoRo presence would result in a DFDS loss of between DKK 100-130 million (USD 17.5-22.8 million).

Naturally, NTEX has placed most of its volume at its own shipping company but that is far from enough to ensure a profitable business

DFDS has once before bought out a competitor on the Gothenburg route; that was in 2004-2005. This might not be possible today as the competition authorities seem to monitor the market situation closely.

EU Action

Tuesday, Thomas Ström informed ShippingWatch that NTEX is preparing a EU action against DFDS based on discrimination. “They (DFDS ed.) have increased our rates while lowering rates for others. Before, we had a series of special agreements with DFDS but they have all been cancelled. At the same time, DFDS is stating that other freight forwarders have special favourable conditions”, said Thomas Ström.

According to DFDS, the shipping company objectively gives its clients rebates based on the volume of transported goods and that it only natural that the prices will change when a large part of the business disappears as it is the case with NTEX.

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