In the summer, the Antimonopoly Committee of Ukraine unexpectedly expressed interest in the agreement regarding the acquisition by the Mediterranean Shipping Company of a stake in the Hamburg port logistics company HHLA. Now even the management of the world's shipping giant declares that for the success of the deal, it is necessary to wait for Ukraine's consent. Why is this so and what prospects can this cooperation open for the domestic container market?
The European Commission granted permission to Mediterranean Shipping Co. (MSC) to acquire a stake in German port logistics company Hamburger Hafen und Logistik AG (HHLA). The EC concluded that the proposed concentration "does not raise competition concerns given its limited impact on competition in the markets in which the companies operate". Before that, MSC had to get approval for the deal from the Hamburg parliament, and it did.
It would seem that the currently largest shipping company in the world with Italian roots and Swiss registration can celebrate a victory. After all, it does become a major shareholder of the port operator, having received 49.9% of the shares (the remaining 50.1% remains with the city of Hamburg). Moreover, HHLA also manages container terminals in Tallinn, Trieste and Odesa. And it achieved this, despite all the political opposition and strikes of the port workers, which lasted for a year. The German media is still calling the agreement "controversial", not to mention the political opponents of the agreement.
But, as it turns out, it is still too early to celebrate the final victory. As MSC General Director Soren Toft said, since HHLA manages the container terminal in Odesa, Ukraine should also have its say. "We hope to get the green light in two, three or four weeks. And then we will become a new partner of HHLA," he said in an interview with NDR.
Hamburg officials are somewhat more cautious in their forecasts and expect the deal to be completed within this year, stressing that the main condition for closing the deal has nevertheless been met.
Soren Toft did not name the specific Ukrainian agency that should "give the green light". But it is not difficult to understand who we are talking about: earlier, the Antimonopoly Committee of Ukraine announced that it had begun "an in-depth study of the state of competition and analysis of the impact of concentrations on the product markets of Ukraine." Because there may be grounds for prohibiting concentration due to the threat of monopolization of the container cargo transshipment market within the Odesa port.
Bonus with nuances
HHLA has been managing "Odesa Container Terminal" ("KTO") since 2001. Before the outbreak of full-scale war, it handled the largest volume of containers among container terminalsof Ukraine and had 35–40% of the market, which already leads to a monopoly, in accordance with Ukrainian legislation.
In the fall of 2020, the construction of the 4th launch complex of the container terminal was completed on the Quarantine Mall. It increased capacity to 850,000 TEU.
With the beginning of the war, "KTO" suspended the transshipment of containers to and from ships. However, it soon continued to receive and store containers delivered by rail and road transport. As the managing director of HHLA International GmbH, Philip Swins, said, from the end of 2022, the terminal will be involved in the transshipment of grain onto ships. Actually, almost all sea container terminals of Ukraine were involved in transshipment of agricultural products at that time.
"Although it is not a grain terminal, we can use our container cranes to load into special containers that open below," Sweens explained in an interview with Germany Trade & Invest.
"We deliver containers by rail from Odesa to the countries of Western Europe. We use our terminal in Odesa, our railway subsidiary UIC in Ukraine and our railway company Metrans in Central and Eastern Europe. Before the war, container flights went by rail from Odesa to the interior of Ukraine (were regular block trains have been launched - TTS)", he shared the details.
And he noted that if in the first months after the beginning of the Russian invasion, the main cargo was grain, then later the structure of the goods changed. But at the same time, the volume "cannot be compared with the transshipment that we had by sea before the war."
Of course, not to compare. "The current flow does not exceed 500-600 thousand TEU per year. Therefore, our throughput capacity is significantly greater than the actual cargo flow. Because the throughput capacity of our container terminals is 3.5 million TEU," says the president of the Association of International Freight Forwarders of Ukraine (AMEU) Viktor Berestenko.
Only in March 2024, the Ministry of Infrastructure reported that Ukraine plans to resume sea container transportation. In the summer of this year, the first since the beginning of the full-scale attack took place the container ship MSC to Odesa. Hamburg-based Hapag-Lloyd resumed operations, putting on a line between the Black Sea and the Romanian port of Constanta together with Ukrainian Iteris Feeders. Maersk also planned a container service to the ports of Greater Odessa in cooperation with Iteris. It was about feeder container transportation between the Romanian port of Constanta and the port of Chornomorsk by a vessel with a capacity of 1100+ TEU.
Currently, Maersk is launching a new weekly feeder service to the port of Chornomorsk from the hub in Port Said, Egypt. The feeder "significantly reduces the transit time to and from Chornomorsk, compared to the barge connection between Constanta and Chornomorsk," the company noted.
In a word, competition among Ukrainian container terminals remains even in war conditions.
Rate on direct port measures
How can the change of ownership of "KTO" affect the Ukrainian market? On the one hand, given the war and all the accompanying circumstances, it is too early to make predictions at the moment. When TTS spoke with market participants on this topic, they assumed that MSC container ships would call exclusively at the KTO terminal in the future. As for other container lines, they can work both through "KTO", buying its services, and through other terminals.
Having acquired a stake in HHLA, MSC itself is concentrating more on the development of the Port of Hamburg itself. "We want to show Hamburg how serious we are. Already this year we have added several trunk lines from Asia, and our volumes in the port are already showing double-digit growth," says MSC CEO Soren Toft. The Odesa terminal is rather a kind of bonus.
On the other hand, even in wartime, MSC is trying not to fall behind the Ukrainian market. Based on MSC's strategic approach, this player will actively develop container lines to Ukraine.
The CEO of MSC predicts that in the near future global supply chains will become increasingly fragmented and shippers will prefer direct port calls. "Supply chains are no longer concentrated around a few countries and no longer rely on one or two large markets, but are becoming more dispersed, and we believe that this requires a wider coverage of ports in the network," Søren Toft noted recently.
But he emphasizes that investment in ports is about operational sustainability, resilience to crises and shocks, and MSC does not invest in them just for profit (MSC operates hundreds of ports around the world).
"On our Asia-North Europe services, we cover twelve ports in Asia (our nearest competitor covers nine) and in Europe we will call at thirteen ports and our nearest competitor will call at seven ports. We plan to provide 1,900 direct connections between ports , because we believe that customers want to be sure that they will arrive at their destination and that direct connections are more important than speed - our network reflects the future of a more connected supply chain," he explained.
With this in mind, it is quite possible that MSC will be able to provide direct concontainer transportation to Ukraine. We will remind you that even before the war, the majority of sea containers for Ukraine were delivered through regional container hubs in Turkey, Greece, Egypt and vice versa. And this affects the final cost of delivery.
However, all this is still a more distant prospect. While the Black Sea remains a risk zone for carriers and players cannot be sure of the safety and stability of the routes. On the plus side for us: these players are making efforts even under the current conditions, so, in the absence of hostilities, they will compete more fiercely with each other and offer new services.