Following the latest wave of consolidation in port towage, there will be opportunities for small players in European ports, says Martyn Wingrove
Following the latest wave of consolidation in port towage, there will be opportunities for small players in European ports, says Martyn Wingrove
Consolidation in container shipping has been hurting business and cutting profit margins for tug owners, and the trend has forced major players to make tough decisions.
The result within the European tug market has been consolidation, with some major tug operators choosing to leave Northern Europe altogether.
This week’s news that Royal Boskalis Westminster and Kotug International are selling their 50/50 joint venture Kotug Smit Towage is one example.
The sale to new owners Boluda Group has an enterprise value of €300M (US$340M) and includes almost 70 tugs in 12 ports in the Netherlands, Belgium, Germany and the UK. Boluda Group is already dominant in ports throughout France and Spain.
Top management from both of the joint venture partners told me the rationale for the sale was that container shipping’s consolidation has resulted in tougher market conditions for harbour towage.
In short, there are fewer clients for harbour tug owners. And the reduced business in northern Europe creates increased pressure for further consolidation.
The 2016 merger that created Kotug Smit Towage began as a way for two businesses to expand. But, by 2019 Boluda’s offer to buy the venture became advantageous for both partners. Upon finding an exit route, Kotug International and Boskalis said they have no plans to reinvest in European harbour towage, although both will keep their Dutch headquarters.
Financial challenges and the need to consolidate were recurring trends of discussion at the European Tugowners’ Association conference in London in November 2018, too.
And I have heard similar opinions directly from Svitzer Europe’s managing director Kasper Friis Nilaus and Multraship Towage & Salvage managing director Leendert Muller.
Consolidation, it seems, may be the only way for the major harbour tug owners to survive in Europe.
Thus, with more consolidation likely ahead, by the end of 2019, I expect three main players to remain in Northern Europe – Boluda, Svitzer and Fairplay group, which resulted from the 2017 merger between Hamburg-based operators, Fairplay Towage and Bugsier Reederei .
At the time, Fairplay Towage managing director Walter Collet said the acquisition was a direct result of the challenging business conditions within the region’s towage sector and rationalisation within container shipping.
However, consolidation is also likely to bring opportunity for local owners whose lower operating costs make them more nimble than larger players.
Unrequired tugs are likely to be sold at low prices and market niches will form where the large groups are unable to operate profitably.
Pressure from regulators worried about monopolies in harbour towage could play a part, forcing big owners to sell tugs or sell-off parts of their businesses.
In ports where local tug ownership and operation is still strong -- smaller ports in the UK or in the Netherlands, for instance -- less competition in harbour towage could allow smaller owners to fill gaps or snap up some of the cast offs from this year’s acquisitions and those that are likely to follow.
Changes in the market are inevitable, but just how much consolidation happens, how quickly it happens and who will benefit could create dramatic shifts in this year’s tug market.
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