The container ship industry has experienced significant change recently. An influx of new ships that boast more container capacity and cheaper fuel costs have caused shipping prices to drop and ocean liners to collect lower profits. However, many container ship and port terminal companies see this as an opportunity to expand business. A.P. Moller-Maersk is one company that has grown rapidly in spite of the slowing industry.
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A.P. Moller-Maersk Is a Leader in the Container Ship Industry
A.P. Moller-Maersk Terminals (APM Terminals) is a Danish shipping conglomerate. It’s also one of the biggest port operators in the world, handling 72 million containers per year. The only company that handles a greater volume than APM Terminals is Hong Kong’s Hutchinson Port Holdings, which handles 80 million containers.
In September 2015, APM Terminals bought a 61 percent majority share in Grup Maritim, Spain’s biggest container terminal operator. Recently, APM Terminals bought out the remaining 39 percent shares. The actual value of the deal was not disclosed by APM Terminals, but analysts predict it exceeded $1 billion.
Grup Maritim managed container terminals in Brazil, Colombia, Guatemala, Mexico, Spain, and Turkey. The Wall Street Journal reports that the purchase adds 11 terminals to the 63 already operated by APM Terminals around the world, along with approximately 4 million container capacity.
Earlier this year, APM Terminals also made a deal with Colombia’s Compania de Puertos Asociados SA to jointly own and operate the Cartegena port and invest more than $200 million. APM Terminals appears to be taking control of the South American ports.
Approach: Invest While Market Conditions Are Poor
The container ship industry must recover from high supply and low demand conditions. APM Terminals decided to make a move at this time because ocean cargo companies are carefully monitoring profits until the market recovers. APM Terminals made its investment after divesting a stake in Danske Bank, as well as an offshore safety unit and a supermarket chain.
According to Drewry Shipping Consultants Ltd., the deal happened partially because of the introduction of massive container ships to the market over the past two years. Operating costs have been up and Grup Maritim saw an advantage to selling at the time. Drewry estimates that container port demand will grow by 4.5 percent globally for the next five years.
APM Terminals CEO Kim Fejfer said, “The complementary expertise and market geography of the Grup Maritim TCB portfolio will enable us to bring more value to our clients, achieve our growth ambitions, and further diversify our global portfolio.” The deal helps APM Terminals create a stronghold in Spain as conditions stabilize and position themselves to take advantage of rapid growth in Latin America.
Impact and Advantage
Ever since the APM Terminals deal with Grup Maritim took place, other port and container operators have been looking to make moves. For instance, Brookfield Infrastructure Partners LP is now in negotiations with Asciano, an Australian port and rail operator and Dubai-based DP World is in negotiations with Fairview Container Terminal in Canada.
The container ship industry as a whole is slow, making investment opportunities high. Many other companies are expected to make acquisition deals in the industry, just like APM Terminals. [/show_to]
