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            december 12, 2018

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China to approve of Maersk's Hamburg Sud merger if it limits route capacity


China's Ministry of Commerce has approved Maersk Line's proposed acquisition of Hamburg Sud on the condition that it limits capacity on certain routes. Hamburg Sud is also required to exit some vessel sharing agreements (VSAs).
Maersk Line has committed to lowering its combined reefer container capacity with Hamburg Sud on the Asia to west coast of South America trade lane from the present level of 45-50 per cent to 34-39 per cent, reported London's Container Management.
The approval is also subject to Maersk Line not extending Hamburg Sud's membership of a VSA currently active on the Asia west coast of South America trade route. The Danish shipping line is also required to end Hamburg Sud's membership of a VSA on the Asia - east coast of South America trade at the earliest date permitted.
In addition, Maersk Line commits to not enter into vessel sharing agreements with its main rivals within five years of closing.
The committed changes will come into after the closing of the proposed acquisition, which is expected before year end.
Maersk Line's chief operating officer Soren Toft told Container Management that synergy planning is well underway with Hamburg Sud volumes to be moved to APM Terminals (APMT) facilities where capacity is available.
Santos, the largest port on the east coast of South America, offers a particular challenge with APMT part of a joint venture running its largest terminal while Hamburg Sud is the biggest customer of the second busiest facility.
"Santos right now is quite full," said Mr Toft. "That would be a market where it's going to be difficult to [move volumes]. Obviously, we're not going to force volumes into an APMT facility if they can't handle them.
"The acquisition of Hamburg Sud starts with keeping the customers and keeping the business. That's the reason why we're buying the company and that's where the centre of attention lies. When we keep the customers, our likelihood of generating the synergies that we have promised and a key part of the business case will also go up."
Mr Toft also noted the company's optimism for the remainder of the year due to good fundamentals with demand growth in the range of four to five per cent surpassing original forecasts.
Maersk's third quarter results, however, disappointed CEO Soren Skou after volumes declined by 2.5 per cent and the carrier lost market share on both north, south and east, west trades.

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