Banker queries delay completion of Hapag-Lloyd-UASC merger
The delay in the merger between Hapag-Lloyd and UASC is due to some of the ...
The dust had barely settled on the announcement that Evergreen is to formally join the CKYH Alliance next month before it appears that the enlarged CKYHE grouping is trying to woo the ambitious United Arab Shipping Company (UASC) into its camp.
However, from comments attributed to CEO Jorn Hinge, UASC will play hard to get – its advantage of ultra-large ship orders putting it in the front line of the unattached ocean carrier beauty contest.
In fact, such is the economy of scale advantage that the proposed P3 network would have had over the CKYH that its members were probably obliged to condense the small print and tie the knot with Evergreen sooner than planned; and then move to hasten the discussions with UASC.
Indeed, analyst SeaIntel in its Sunday Spotlight, looked at the impact of Evergreen’s recruitment to the CKYH Alliance and concluded that the inclusion of the Taiwanese carrier would not close the gap much on its P3 rivals, taking the average size of its ships on Asia-Europe from approximately 9,050teu to nearly 9,900teu – assuming that the new CKYHE partnership deploys its largest ships on the route.
This compares unfavourably with the P3, which according to SeaIntel can boast an average vessel size of 12,200teu, thereby giving the Maersk, MSC and CMA CGM grouping an economy of scale advantage of around 25%, that could equate to a several hundred dollar per teu lower cost base over its CKYHE competitors.
Meanwhile, how the “strategic co-operation agreement” recently signed by CKYHE member Cosco with compatriot China Shipping Container Lines (CSCL) will work in practice remains to be seen.
The Beijing-brokered deal for the two sickly state-owned groups encompasses “resource-sharing mechanisms in [the] areas of shipping, terminal operation, logistics, shipbuilding and ship repair”, and at first glance appears to be the preamble to a full-blooded merger.
Currently, UASC has a ten-year collaboration agreement with CSCL and between them they have ten 18-19,000teu vessels on order that will trump the Triple-Es operated by Maersk. And in the case of UASC, it will also have the option for the ships to be retrofitted to be run on LNG, bringing massive savings on fuel costs that can often be as much as 40% of voyage costs.
Moreover, according to SeaIntel, both CSCL and UASC joining the CKYHE on its Asia-Europe service would have a “positive impact on the alliance’s average vessel size in the trade from day one”, and would offer mutual benefits.
SeaIntel COO and partner Alan Murphy said: “The new collaboration between Cosco and CSCL should most likely be seen as a partial step toward a potential merger. However, the agreement does not constitute merger talks, but it represents a solid step towards becoming a consolidated Chinese container carrier, if we only focus on the container units.
“Further, the CKYHE Alliance’s economy of scale would also be improved if CSCL joins the alliance, which we believe is very likely.
“The question is whether UASC will also join the alliance. It has been confirmed by several media sources that discussions have been ongoing between the Arabian carrier and the alliance, and we believe that both parties would benefit from a possible agreement.”