American Shipper

Analysis: Germany’s Big 2 – how a merged network would look

   The potential for savings arising from a consolidation between two globe-spanning companies with a common language and culture, both already headquartered in same city, Hamburg, must be substantial.
   Hapag-Lloyd is currently 50 percent larger than Hamburg Süd, measured in terms of ship capacity. According to current figures published by Alphaliner, it has 634,000 TEUs compared with Hamburg Süd’s 417,000 TEUs. It ranks No. 6 in the world, compared with Hamburg Süd’s position at No. 12. However, when their combined order books of 33 ships are included, (seven for Hapag-Lloyd and 26 for Hamburg Süd) Germany’s Big 2 would aggregate 1,310,000 TEUs, ranking a clear world No. 4, not far behind CMA CGM in third place (with 1,524,000 TEUs).
   To put this in some perspective, when current order books are included, Maersk Line will have 3 million TEUs of ship capacity, Mediterranean Shipping Co. 2.6 million TEUs, CMA CGM 1.5 million TEUs, and Hapag-Lloyd/Hamburg Süd 1.3 million TEUs. Behind them would be Evergreen Line with 1 million TEUs and COSCO with 870,000 TEUs.
   A detailed analysis of the liner services of Hapag-Lloyd and Hamburg Süd in BlueWater Reporting Service Tracker published April 6 revealed that unlike Hamburg Süd, Hapag-Lloyd has near global network coverage. Most noticeably, it has very substantial commitments to east-west trade, whereas Hamburg Süd has no east-west involvement except in the transatlantic. In the transpacific and Asia-Europe trades Hapag-Lloyd is Germany’s exclusive high-profile member of the Grand Alliance, partnering Japan’s NYK and OOCL of Hong Kong.
   On the transatlantic, where Hapag-Lloyd has a top market share, Hamburg Süd had become marginally involved on four loops, three drawing heavily on partnerships with Hapag-Lloyd. One of these is a new joint venture linking the West Med with Cartagena, Colombia, and the west coast of North America. Hapag-Lloyd provides eight ships and Hamburg Süd two.
   A more interesting part of the analysis began when looking at southern hemisphere regions where one or the other of the German lines has traditionally been strong. Here, we find that a progressively higher degree of cooperation or parallel involvement is apparent. This particularly applied to South America and Oceania. In trades to Africa and Far East-Southwest Asia, again it was found that only Hapag-Lloyd has established a presence, often by means of taking slots with amenable third parties.
   Nevertheless, unlike Japan’s Big 3 or the twin Korean and twin Chinese top lines, Germany’s Big 2 lines are already working closely together. This may surprise those mainly familiar with Hapag-Lloyd in the transpacific or Asia-Europe trade, branding itself modestly within the Grand Alliance – or lately the “G6” in the case of Asia-Europe. Yet, out of a total 41 Hamburg Süd loops outside the coastal trade of the east coast of South America, 19 were already being shared in one way or another with Hapag-Lloyd.
   Most prominent of these partnerships were seven vessel sharing loops where each provided one or more or the ships. For instance, the Europe-to-Mideast IOS loop had four Hapag-Lloyd and three Hamburg Süd ships, with Hambug Süd’s subsidiary Alianca chartering slots. (Brazil-registered Alianca is like a shadow. It takes slots on every single loop where Hamburg Süd goes, even if Hamburg Süd itself is only taking slots.) Germany’s Big 2 shared vessel provision on two WCNA-Oceania loops and two Europe-WCSA loops, the latter via their joint Columbia hub port of Cartagena. They also shared vessel provision on the South China-East Australia FA2 loop alongside Hyundai and APL. Their most recent, seventh, vessel sharing cooperation involves the West Med–Cartagena-WCNA loop referred to above.
   When it comes to mutual slot-chartering, the German pair were similarly already very active. There were nine loops where one or the other provided vessels and the other took slots. While Hapag-Lloyd chartered slots to Hamburg Süd on two of its transatlantic loops, Hamburg Süd gave Hapag-Lloyd slots on a Japan/Korea-New Zealand loop where Hamburg Süd provided two of six ships. Hamburg Süd also provided Hapag-Lloyd with slots between Europe and ECSA on its River Plate Express and between Oceania and Cartagena/Manzanillo (Panama) on its joint Oceania-USEC loop with Maersk and MSC. Hapag-Lloyd even took slots with Hamburg Süd on two of the latter’s three dedicated North Europe-Med services. (Hapag-Lloyd also took slots on two similar loops provided by MSC.)
   Between Asia and Oceania both Hamburg Süd and Hapag-Lloyd were slot-charterers on two double-back “butterfly” loops provided mainly by Maersk Line. One was the 11-ship Boomerang loop, two of whose ships are provided by MSC, and the other was the nine-ship NZ1. Finally both German carriers took slots on a loop led by China Shipping, providing them with yet another link between China/Taiwan and East Australia.
   On most other trades where Hamburg Süd was particularly well established, Hapag-Lloyd either had a parallel service of its own, or took slots with third party carriers. Typical trades involved ECSA. From the U.S. East Coast Hamburg Süd provided five out of seven ships in partnership with CSAV, while Hapag-Lloyd took slots on two other loops, one provided by MSC and another, with smaller ships, led by NYK. Between the U.S. Gulf and ECSA Hamburg Süd has a 4,000-TEU loop of its own, running in parallel with a 5,500-TEU loop where Hapag-Lloyd provides five ships alongside three from CSAV. In the Asia-ECSA trade Hamburg Süd is a high-profile big-ship partner to Maersk Line, while Hapag-Lloyd provided two out of 11 ships in a loop shared with Hanjin, Zim, CCNI and Wan Hai.
   Interestingly, the same mixture of shared and separate hub-and-spoke feeder patterns emerged around the various hubs the German lines both use close to Panama. There were a lot of multiple calls by both deepsea and feeder loops, occasioned by joint services with one another (already mentioned), or other partners like Maersk Line, CMA CGM, or the Grand Alliance. Hamburg Süd calls intensively at Cartagena. Out of a total 10 loops it had calling there, six did not involve Hapag-Lloyd. Hapag-Lloyd had six Cartagena loops, two without Hamburg Süd. Six of the loops calling Cartagena also called Manzanillo, and in addition two of Hapag-Lloyd’s Grand Alliance all-water loops connect there en route from Asia to the U.S East Coast. One of these, the 14-ship PAX pendulum provided by Hapag-Lloyd, arrived Manzanillo inbound via “spokes” from Seattle, Oakland and Balboa. After calling the U.S. East Coast, PAX continues to Europe. On the way back to Asia from Manzanillo (Panama) it calls Los Angeles and Oakland.
   In addition to their joint MPS loop linking Cartagena from the Med with WCNA, both Hapag-Lloyd and Hamburg Süd share strong “spoke” connections from their West Caribbean hubs to WCSA with their two joint services from North Europe, but they keep the rest of their Mexican, Central American and Caribbean feeder links running independently. Hamburg Süd had an “extra” WCSA mainline loop (without Hapag-Lloyd), running in partnership with CSAV and CCNI from the U.S. East Coast. This called Cartagena in both directions, plus Manzanillo southbound and Balboa northbound.
   As previously indicated it is in the transatlantic trade that Hapag-Lloyd single-handedly gives Germany strength in depth. Hapag-Lloyd provided ships on no less than 10 transatlantic services and took slots on three more. These 13 loops connect North Europe and the Mediterranean directly with most of the significant ports in North America and Mexico – from Halifax and Montreal in Eastern Canada, right round to Vancouver on the West Coast. In all these trade lanes, Hapag-Lloyd is a driving force.
   As Hapag-Lloyd’s ownership becomes available for possible control by Hamburg Süd, it is worth reflecting on its strategic value in this regard. Its loss to Germany would be similar to the loss of Sea-Land to the United States, or P&O Nedlloyd to the United Kingdom and Holland, both of which were removed as major global cross-trade competitors on being purchased by Maersk.
   The rest of Hapag-Lloyd’s world network lying outside the Grand Alliance trades, or the areas already discussed, are thinly spread by comparison. These remaining trades contribute significantly, though, to an insightful overview of global trade concentrated in Hamburg. For this, Hapag-Lloyd relies on key partnerships with CMA CGM, such as U.S. East Coast-India or Europe-Australia via Suez, or slots on CMA CGM’s North Europe-Central America ECS loop calling Cartagena. Hapag-Lloyd maintained its own very small ECNA-South Africa connection with three 728-TEU multipurpose vessels sailing every 26 days and it only has a presence in the Europe-South Africa trade thanks to slots from MSC. From Asia to West Africa, there a four-line grouping was formed with 11 ships, of which Hapag-Lloyd provided only one.
   Even in the Asia-India-Mideast and Red Sea trades, where Hapag-Lloyd had good coverage on four loops, it achieved this while providing only three ships. From Southeast Asia to Oceania, in addition to securing slots on the Maersk/MSC Boomerang, it also chartered slots on two more loops – one run by NYK, OOCL, MOL and PIL to Brisbane and New Zealand, and the other by RCL, “K” Line and Hanjin to East Australia.
   The April 6 analysis initially considered a hypothetical merger between Germany’s Big 2 liner operators, only to discover they are already cooperating, or running in parallel, as cross-traders in significant parts of the world. It also illuminated how closely both lines are already working in partnership with the world’s privately owned Big 3 – Maersk Line, MSC and CMA-CGM – who run a fairly exclusive club. Between them Hapag-Lloyd and Hamburg Süd share 15 loops with Maersk, 15 loops with CMA CGM and eight with MSC (with no double counting). It’s a good initial pedigree for an aspiring world No. 4 – should such a merger ever come to pass. These figures excluded intra-ECSA, where Hamburg Süd and Maersk run a joint network of coastal cabotage and feeder services. – Francis Phillips