South East Shipping News

Two out of three Miami terminals seek alliance to negotiate with container lines

Reynolds Hutchins, Associate Editor | Dec 08, 2016 3:54PM EST
Additional reporting Rick Eyerdam

An agreement between the South Florida Container Terminal and Port of Miami Terminal Operating Company could be the first of many at US ports.

WASHINGTON — US regulators are reviewing a proposed agreement between two marine terminal operators at the Port of Miami that would allow the terminals to jointly negotiate terms and conditions with container lines — a first for the United States.

Although the port of Seattle and Tacoma came together operationally as the Northwest Seaport Alliance in 2015, this is the first time two marine terminals have sought the Federal Maritime Commission’s blessing to create their own alliance. Miami’s South Florida Container Terminal and Port of Miami Terminal Operating Company want to jointly negotiate, set, and approve terminal rates, charges, rules, and regulations, and rates of return between the terminals.

South Florida Container Terminal is an APM terminal, in essence, with the added benefit of a common user terminal designation. POMTOC was PortMiami’s only common user terminal until the port made all three terminals common user, including the Sealand Terminal.

But as Maersk withdrew from its APM terminals and sold interests in them, the benefit of Maersk’s exclusive calls at it’s terminals was displaced by a need for greater warf space and increased need for limited SuperpostPanamax cranes. Rather than compete for the limited resources at PortMiami and drive down costs in the competition the two adjacent terminals decided it would be easier to collaborate.

The terminals’ request parallels the vessel-sharing agreements container lines have formed to pool their cargo in larger ships in order to mitigate overcapacity and broaden their networks. Through the alliances, the container lines still compete with fellow members, and are forbidden from jointly marketing, selling, or contracting with third-parties, such as tug operators and stevedores.

According to FMC Commissioner William Doyle, agreements such as that in Miami are a direct response to the Ocean Alliance, a VSA between China Cosco Lines, Evergreen Line, CMA CGM, and Orient Overseas Container Line set to take sail in April.

The Miami terminals did not respond to requests for comment from JOC.com.

“Since the Ocean Alliance is allowed to jointly negotiate as an alliance with marine terminals who agree to do so, some marine terminal operators and port authorities may want to explore options for entering into their own alliances where they could jointly negotiate terms and conditions with the ocean carriers,” Doyle said at a North Atlantic Port Association meeting outside of Washington, DC. last week.

FMC commissioners say they have also been approached by others, including the South Carolina Ports Authority, regarding a potential partnership with another Southeast port operator.

“We’re absolutely going to have more agreements,” FMC Chairman Mario Cordero told JOC.com this week.

Doyle said the Miami terminals’ discussion agreement is a step beyond that of the Northwest Seaport Alliance, which gained the FMC’s green light in July 2015, because it will also allow those terminals to jointly negotiate terms and conditions for services with the ocean carriers.

Language in the proposed agreement includes conference and rate-setting authority that would allow the terminals to discuss and agree on matters of rates, charges, rules, and regulations through joint or individual marine terminal operator agreements with ocean common carriers. Additionally, the proposal would authorize the terminals to meet individually or as a group with one or more users, including ocean common carriers, to discuss any matters related to rates, charges, rules, and regulations.

The agreement appears to allow the terminals to jointly meet with a group of ocean common carriers, like an alliance grouping, and come to a joint agreement for services, Doyle said.

The draft agreement submitted on Nov. 16 is still under review, but has received some positive feedback from the likes of Doyle and Cordero. As with vessel-sharing agreements and the agreement for the Northwest Seaport Alliance, the FMC is expected to publish the language of the agreement for a public comment period. The FMC will then have 45 days to request additional information before making a decision.

“At the end of the day, you can’t have major ports in the same region independently trying to address issues in the supply chain,” Cordero said. “This agreement allows the FMC to monitor this in such a way that it doesn’t border collusion or anticompetitive behavior.”

Contact Reynolds Hutchins at [email protected] and follow him on Twitter: @Hutchins_JOC.

Friends and associates:
Early in June things were looking good. I was preparing my book marketing agenda (Inside NASA’s Quest for Life in Space) with hopes of appearing at the Miami Book Fair.
The recurring pain in my legs was improving to such an extent I was ready to start working on the stationary bike. And I quit smoking! Then, at the end of June I had a stroke.
Baptist Hospital was wonderful and my recovery was swift with few residual signs of damage. I had problems with complicated thought and recovering the correct terms for concepts and nouns, still do. The stroke knocked the book marketing plans akimbo because I could no longer speak with confidence on behalf of my book. That situation is improving, however.
The stroke had another unexpected consequence. When I began to recover enough to get out of bed while still in the hospital, my leg pain was excruciating. Fortunately, a wise attending ARNP suggested an MRI and from that MRI, I learned that separate from the stroke, I also have a cyst on my spine and spinal stenosis.
Since June I have been relatively immobile, taking meds four times a day to stabilize my blood pressure, watching TV, sleeping and going for tests leading to spinal surgery. Thank God for American Pickers!
Now that the blood pressure is stabilized and the tests are concluded I have scheduled my surgery for Dec. 28th at Baptist. They will separate my spine, cut out the cyst and offending bone/vertebrae, emplace a spacer then lock it all in place with titanium bolts. It seems a daunting procedure but I am assured it happens all the time with a high rate of success.
The surgery will be followed by three or four days of hospitalization while the pain is controlled then weeks of rehab at a Baptist-related facility.
My doctor made no bones about my situation. I am a 68-year-old car with flat tires and a screwed up drive shaft. He can fix the tires and straighten up the drive shaft but I am never gonna be a new car again.
My wife, Debbie has been an anchor throughout all of this. She smiles through it all and wakes me each morning with the pitter patter of my pills and a look of encouragement that could never be replaced. So I’m blessed, truly blessed.
Still, wish me luck; and for those of you who pray, add me to your list.

Maersk Line to acquire Hamburg Süd in cash deal worth up to $5bn

According to vesselsvalue.com, Hamburg Süd’s fleet of 44 vessels, all operating north-south services in the Latin America market, is valued at $1.44bn.

By Mike Wackett 01/12/2016
Maersk Line today announced it is to acquire Hamburg Süd in a cash deal one analyst claims could be worth up to $5bn.

“We estimate the takeover price in a range from $3bn-$5bn, which would increase Maersk’s leverage from 1.2x to around 1.6x full year 2017 EBITDA,” said Jeffries in a research note.

Maersk’s acquisition of the world’s seventh-biggest carrier would lift its capacity to 3.8m teu, from its current 3.1m teu, giving it an 18.6% global share.

The financial implications are harder to gauge, given the highly secretive nature of Hamburg Süd as part of Germany’s private Oetker Group.

“Profitability of Hamburg Süd hasn’t been disclosed, but we suspect it is depressed in the low container freight rate environment,” Jeffries said.

“As a result, the takeover would only create value if profitability would recover, through a combination of significant cost synergies and a potential recovery of container freight rates,” added the analyst.

The deal, following a recent wave of industry consolidation, will leave only 13 global carriers, compared with 20 at the start of the year.

According to vesselsvalue.com, Hamburg Süd’s fleet of 44 vessels, all operating north-south services in the Latin America market, is valued at $1.44bn.

The carrier recently made a foray into the east-west trades, but Maersk Group chief executive Soren Skou said today that “no decision had been made” on whether these services would continue after the completion of the acquisition of the German carrier at the end of next year.

Mr Skou told The Loadstar this morning that the “strong Hamburg Süd, Alianca and CCNI brands” would be maintained in Latin America, subject to regulatory approval, and that the east-west business “would fall within the 2M [alliance]”.

According to Alphaliner, Hamburg Süd purchases more than 2,000 slots a week from UASC, Cosco and APL as part of its global liner service offering on the Asia-Europe, transpacific and transatlantic trades.

These slot-charter agreements are set to end next April with the formation of the new vessel-sharing alliance structure, and it is difficult to see how Hamburg Süd could maintain its east-west market.

“Hamburg Süd is a very well-run and highly respected company with strong brands, dedicated employees and loyal customers,” said Mr Skou. “It complements Maersk Line, and together we can offer our customers the best of two worlds, first of all in the north-south trades.”

Chairman of Hamburg Süd Group, Dr Ottmar Gast, said the decision to “divest its engagement in shipping”, which can be traced back for 80-years, “was not an easy decision for my family”.

A separate statement from Oetker Group said continuing “active participation” in the shipping sector “would entail an even higher capital requirement”, which would “make the balancing of risk within the Oetker Group business portfolio more cumbersome”.

It added that in its view Maersk was “the ideal partner to preserve and further develop the shipping company’s successful business model”.

Mr Skou confirmed that the Hamburg Süd head office in Hamburg would be maintained, although he did not elaborate on integration of offices around the world, or the carrier’s 6,000-strong workforce, other than to pledge a “light touch”.

Mr Skou also hoped for synergies for Maersk’s terminal operation, APM Terminals, from the takeover.

He refused to be drawn on the acquisition price, other than to confirm that it was an “entirely cash transaction” with “no need to sell assets”.

Subject to obtaining regulatory approval from China, South Korea, Australia, Brazil, the US and the EU etc – a process expected to last until the latter part of next year, Maersk hopes to close the transaction by year-end 2017.

Product tankers, tramp, and other shipping-related operations made up around 7% of Hamburg Süd’s $6.7bn revenue in 2015. Mr Skou said there were “no plans for them as yet”. It is assumed they will be disposed of shortly after the takeover.