08 Januari 2014

[080114.EN.SEA] Hapag-Lloyd And CSAV Union Makes Sense To Drewry, Not To Alphaliner

ON the face of it, a merger between Hapag-Lloyd and CSAV looks like a win-win situation to London's Drewry Maritime Research if a deal meeting the financial interests of both sides can be worked out.

But Paris research house Alphaliner is doubtful, saying the pair are ill-matched for merger.

"CSAV and Hapag-Lloyd have disparate shareholders with no clear consensus on the future strategic direction for both companies, making a merger deal difficult to forge," said Alphaliner analysts.

"CSAV's value as a merger candidate is also impaired as its shipping operations are chronically unprofitable and it has been steadily losing market share in core markets, despite scaling down its global coverage since 2011 to focus on its core Latin America market," said Alphaliner.

"Although the German press suggests that both carriers have complementary liner networks, the likelihood that the discussions will lead to a merger is low," they said

But Drewry analysts were optimistic: "This could include a straight takeover of CSAV by Hapag-Lloyd, assuming an acceptable price can be agreed, or a joint company in which each partner would have a shareholding commensurate with its perceived value by tradelane or on a global scale."

There is little service duplication, they said, so both carriers would benefit from improved economies of scale and geographic scope. CSAV is a moderately sized player in South America, where Hapag-Lloyd has comparatively little.

Looking on the darkside, Alphaliner said: "CSAV's total capacity deployed on Latin American routes has decreased 23 per cent from 270,000 TEU in January 2011 to 217,000 TEU currently, while Hapag-Lloyd's capacity on this sector has also shrunk 14 per cent from 87,000 TEU to 75,000 TEU."

Over the same period, Alphaliner pointed out that vessel deployment on Latin American routes increased by 18 per cent, led by capacity increases by MSC, Hamburg Sud and Maersk as well Evergreen, Cosco and MOL.

"The discussions between CSAV and Hapag-Lloyd are therefore more likely to lead to further cooperation on joint services instead of an outright merger, especially on the Latin America sector as both carriers seek to stop their declining market shares from falling further," said Alphaliner.

But Drewry finds advantage here. "This means that, by combining both companies' South American cargo volumes, they should be able to more strongly set the agenda for jointly run services with other lines," said Drewry.

Hapag-Lloyd deploys no vessels between Europe/ECSA, Asia/ECSA or Asia/WCSA and competes only through slot charters or swaps involving other tradelanes where CSAV is weak.

Combined volumes would enhance their joint market clout, and the extra vessels deployed would then enable them to set up more relay services between east-west and north-south services.

Hapag-Lloyd's mighty east-west schedule strength dovetails into CSAV's north-south flow, a good start to a global network.

"Like many other carriers, both companies were in the red in the first nine months of the year following a ruinous first quarter, and are likely to end the year that way," said Drewry.

Yet Hapag-Lloyd has been open about wanting to expand, expressing the hope that it will catch up with Maersk, MSC and CMA CGM, by first overtaking Coscon and Evergreen.

Source : HKSG.

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