Dive Brief:
- Hapag-Lloyd reported that its merger with UASC closed Wednesday, ten months after its original announcement, providing the former line with a greater capacity and network.
- The German line now boasts a fleet capacity of 1.6 million TEU on 230 vessels. While still the fifth largest shipping company by capacity, Hapag-Lloyd will nearly rival COSCO Shipping in size, per Alphaliner data.
- The business integration process will begin in eight weeks, and is projected to be completed by the end of the third quarter. Hapag-Lloyd expects to save $435 million in synergies by 2019 due to the merger.
Dive Insight:
The Hapag-Lloyd deal with UASC may have earmarked a wave of consolidation in the shipping industry, but closing the deal was more difficult than originally anticipated. The world of container shipping is far different now from what it was in July 2016.
Since the signing of the deal, most of the industry adjusted its networks to align with three shipping alliances (down from four), the world's then-sixth-largest carrier Hanjin Shipping vanished into bankruptcy, Hyundai Merchant Marine emerged as the de facto South Korean carrier while SM Line was borne from Hanjin's ashes, Maersk purchased Hamburg Sud, and the three major Japanese maritime carriers announced their intent to merge (not without hiccups). Rumors persist consolidation is not yet over, either.
These industry shifts, and particularly Hanjin's bankruptcy, reportedly made banks less wiling to provide the shipping industry the necessary loans. Even with Hanjin out of the picture, overcapacity plagued the industry, forcing down rates and losses across the board. It's not too hard to see why lenders were queasy.
The deal's closing was postponed twice, first to March 2017 then to May 2017, as UASC struggled to secure funds for its part of the deal. Now the preliminary chapter is closed, the two lines will face the challenge of integrating their networks without inconveniencing customers. Recent history shows that's often easier said than done.
