Friday, September 12, 2014

New Alliance Produces World's Fourth Largest Container Shipping Line

Merger Approved - but Only on Condition Other Deals are Cancelled
Shipping News Feature

EUROPE – WORLDWIDE – The European Competition Commission has approved the merger announced in April between container shipping lines Hapag Lloyd and Compañia Sud Americana de Vapores (CSAV), but only if the Chilean company withdraws from two consortia on trade routes between Northern Europe, and the Caribbean and South America's West Coast, where the merged entity would have faced insufficient competitive constraint to avoid a risk of price hikes. This merger will create the fourth largest container shipping company worldwide, after Maersk, MSC and CMA CGM, respectively, with some 200 vessels, an annual transport volume of 7.5 million TEU and a combined turnover of approximately €9 billion.

The Commission had concerns that the new links, created between Hapag-Lloyd and CSAV and the previously unconnected consortia, would have resulted in anti-competitive effects on two trade routes: that between Northern Europe and the Caribbean, and the route between Northern Europe and South America's West Coast. On these trades the merged entity, through the existing consortia that the two companies belong to, may have influenced capacity and therefore prices to the detriment of shippers and consumers.

In order to address these concerns the companies offered to terminate the two consortia in which CSAV currently participates on these two trade routes: the Euroandes consortium and the Ecuador Express consortium, both with MSC. This is intended to eliminate the additional links between previously unrelated consortia that the merger would have created on the two routes.

The Commission concluded that the proposed transaction, as modified, would not raise competition concerns anymore. This decision is conditional upon full compliance with the commitments. Another option would have been for Hapag Lloyd to terminate its participation in the Eurosal consortium with Hamburg Süd and CMA CGM. Commission Vice President in charge of competition policy Joaquín Almunia said:

"Liner shipping plays a central role in global trade, so competition in this sector is essential for businesses and consumers in the EU. Through the commitments, our decision averts the risk that the merger between Hapag Lloyd and CSAV could lead to any price increase."

Approvals in a few other jurisdictions are still pending, one of which would presumably from the Chinese Authorities, the very ones that denied the P3 Network, and are probably being consulted on the new 2M alliance and the recently announced Ocean Three agreement. At the beginning of August, the Department of Justice of the United States had cleared the Hapag-Lloyd CSAV transaction, having cleared the ill-fated P3 a few months before.

MSC semingly have little to worry about though, as a report by Alphaliner has tipped the Swiss firm to surpass Maersk as the world largest container line by the end of 2016. According to the industry analyst, MSC’s order book is now over 610,000 TEU having recently been linked to two new sets of orders for over 19,000 TEU ships.

Editors Note: Rumours that MSC’s sudden growth is linked to the fact they choose to advertise with this publication can be construed as the reader wishes…….