Big players have made acquisitions in the European shortsea shipping market, emphasising the significance of this sector
The European shortsea container market is a dynamic sector – and is being strengthened with large global players including CMA CGM and DP World snapping up players in it.
The importance of this market to CMA CGM is underlined as in June this year it signed an agreement with Container Finance Ltd to acquire container shipping and logistics business Containerships – a move that will strengthen CMA CGM’s intra-European offering, as the Finnish company specialises in this market. This transaction remains subject to approval by the relevant authorities.
Founded in 1966, Containerships is an intra-European shortsea specialist with a strong presence in the Baltic market, Russia, northern Europe, North Africa and Turkey. With a workforce of 560 people, Containerships offers its customers a complete range of services, including logistics solutions by ship, truck, rail and barges. Containerships will take delivery of four LNG-fuelled vessels between August 2018 and January 2019.
Containerships’ network will complement CMA CGM and its affiliate MacAndrews’ service offering in north Europe and the Mediterranean.
CMA CGM Group is already present on the intra-regional market through its subsidiaries: CNC in intra Asia, Mercosul, one of the leading players in Brazil’s domestic container shipping market, Sofrana, a key player in the Pacific Islands regional maritime trade, and MacAndrews in Europe.
A statement said the acquisition of Containerships will “strengthen even more the development strategy implemented by CMA CGM Group chairman and chief executive Rodolphe Saadé, aimed at densifying the group’s regional network”.
And in August this year DP World acquired Unifeeder, the largest container feeder and growing shortsea network operator in Europe. It has announced the acquisition of Unifeeder Group for €660M (US$766M) from Nordic Capital Fund VIII and minority shareholders.
Enter DP World
Based in Aarhus, Denmark, Unifeeder operates the largest and most densely connected common user container feeder network in Europe, serving both deepsea container hubs and the intra-Europe container freight market.
The acquisition is subject to regulatory approvals and is expected to be earnings accretive in the first full year after completion. DP World said it will be financed from existing balance sheet resources and is expected to close in Q4 2018.
Unifeeder, founded in 1977, is an integrated logistics company with connectivity to approximately 100 ports.
DP World group chairman and chief executive Sultan Ahmed Bin Sulayem said “We are delighted to add the Unifeeder brand under the DP World umbrella, which supports our strategy to grow in complementary sectors, strengthen our product offering and play a wider role in the global supply chain as a trade enabler.
“The ever-growing deployment of ultra-large container vessels has made high-quality connectivity from hub terminals crucial for our customers and Unifeeder is a best-in-class logistics provider in this space with a strong reputation in Europe.”
He laid out plans for the acquisition: DP World’s aim is to leverage the inhouse expertise of Unifeeder and to accelerate growth. “Unifeeder operates on the same common-user principle as DP World and adds to the group’s strong value proposition to international shipping lines and end cargo owners in making the global supply chain more efficient and cost effective.”
Unifeeder chief executive Jesper Kristensen said “Not only is there commonality with our business models but we also share the vision of serving our customers through removing inefficiencies and delivering sustainable shareholder value. We have enjoyed great success over the last five years under Nordic Capital’s ownership, and we believe that the Unifeeder brand within the DP World Group has the opportunity to accelerate growth, expand further and take the business to the next level.”
Both CMA CGM’s and DP World’s move into the shortsea and feeder shipping market highlights the growing trend to integrate the supply chain more deeply.
Moreover, ClipperMaritime consultant James Caldwell pointed out that Maersk Line has negotiated an exclusive contract with BG Freight for Irish Sea traffic, after a competitive tender process involving a number of third-party operators. He said the “aim was to achieve significant cost reductions”. He added “Greater purchase activity vessel owners like MPC Container Ships have made a number of acquisitions in the segment in the last year or so.”
He commented that there was a general shortage of tonnage in the smaller vessel segment in Europe, as demonstrated by charter rates for the 1,700 TEU range spiking nearly 50% in H1 2018 (Hamburg Ship Brokers Association). Mr Caldwell added “Nearly 10% of the global fleet in the smaller size range is hitting the 25-year-old mark so will need to be scrapped in the coming years.”
Opportunities for European shortsea shipping includes the bigger ships being used. Mr Caldwell explained “Continued upscaling of tonnage on key east–west trade routes, larger ultra large container ships (ULCVs) with more limited call patterns have a greater demand for feeder traffic to serve spoke ports with limitations on water depth and handling capabilities.”
This has had a knock-on effect on the size of feeder vessels. Dynamar’s Transhipment and Feedering 2018 - Trades and Operators - Ships and Hubs report commented “As many feeder ports have become more capable over time, they have allowed the feeder ship to grow larger too.” It said the average common feeder vessel was 1,300 TEU today against 700 TEU 10 years ago, with a 2,000 TEU average against 1,200 TEU for those employed by the dedicated operator. But it pointed out there are always exceptions: recently MSC used a 10,000 TEU ship on to Antwerp-Eastern Baltic feeder route.
The Baltic Sea area is a booming shortsea shipping market within Europe. Feeder volumes in the Baltic region have seen their strongest historical growth rates. Container imports to the Baltic region from 27 European countries have grown at CAGR 13% since 1997, according to ClipperMaritime data. Mr Caldwell said this was partially due to limitations in infrastructure – there are only two deepwater ports in the region receiving regular deepsea ULCV calls on east-west services (Gothenburg and Gdansk).
He added “The largest market remains Russia and the key port in the region, St Petersburg, is limited by the need for ice-class vessels during the winter months, despite the size of its hinterland market. It is also worth pointing out that other Baltic ports like Tallinn can also serve Moscow via direct rail services.”
But demand in the Russian market has slowed to 3% CAGR in the last 10 years, Mr Caldwell said, principally due to the global financial crisis of 2008-2009. “This figure has slowed even further in last five years to about 1% CAGR with the financial slow-down in Russia 2014-2017 (primarily caused by low oil prices and sanctions which triggered a new ruble crisis),” he commented.
There is no doubt the European shortsea container market is dynamic and fast-moving. The recent acquisitions by major players and the ever-larger vessel size being used in this region, suggest this sector will play an even stronger role in the European container sector.
Feeder market facts (Dyanmar)