The presence of a major player in the freight forwarding industry continues to grow stronger as we enter the second half of 2016. Hapag-Lloyd, already an influential company in the industry, merged with the Dubai-based United Arab Shipping Company this Monday, creating the world’s fifth-largest container shipping line. The merger is expected to be finalized by the end of this year.
This merger will result in a fleet of “237 vessels that offers a total capacity of an estimated 1.6 million 20-foot-equivalent units, an annual transport volume of 10 million TEUs and a combined revenue of approximately $12 billion.” As owners and operators of UASC, Qatar and Saudi Arabia will own 14 and 10 percent of the merged carrier, respectively.
Rolf Habben Jansen, CEO of Hapag-Lloyd, expressed his enthusiasm for the merger, explaining the benefits that both parties will gain. For UASC, they will gain access to the immense market coverage and strong customer base that Hapag-Lloyd has built up. On the other hand, Hapag-Lloyd will receive new access to the ultra-large container vessels offered by UASC.
This merger comes at an important time for Hapag-Lloyd, which faced a net loss in the first quarter of this year and had to lower this year’s earnings outlook to a more conservative value. Recent recovery rates in July were described as “insufficient and unsustainable”, which leads many to believe that this merger is the big play that Hapag-Lloyd is betting on to generate a more profitable 2017.
Additionally, this will strengthen the competitiveness of the newly-formed THE Alliance, which also includes members “K” Line, MOL, NYK Line, and Orient Overseas Container Line. According to the June 29 Alphaliner, the merger will bolster the alliance’s market share on the trans-Pacific trade to approximately 33 percent and the market share on the Asia-Europe trade to 28 percent. With the recent legal issues the NYK Line is facing on charges of ro-ro price fixing, the alliance will need all the help it can get.