World's biggest freight forwarder to buy ports?

Klaus-Michael Kuhne is a member of the third generation of the Kuhne family (Kuhne +Nagel co-founder), and is now the honorary chairman and majority shareholder of the world's largest maritime freight forwarder Kuhne +Nagel (holding 53.35% of the equity). He is also one of the largest shareholders of Hapag-Lloyd, the world's fifth largest liner company and Germany's largest liner company (with 30% equity as CSAV), and a shareholder of Lufthansa (10.01% equity), worth as much as 39 billion US dollars, is the world's 29th richest person.

Klaus-Michael Kuhne has deep roots in Hamburg and is involved in many fields. He is a shareholder of the famous football team Hamburg and has pushed for the construction of a new opera house in Hamburg. In terms of port logistics, as a shareholder in 2021, he intends to promote the merger of two major German port operators HHLA and Eurogate to integrate major German port assets (as shown in the figure, HHLA controls the CTB, CTT and CTA terminals of the Port of Hamburg). Eurogate had a presence in the ports of Hamburg, Bremerhaven and Wilhelmshaven) to reduce internal competition, but the plan was eventually shelved.

Klaus-Michael Kuhne has deep roots in Hamburg and is involved in many fields. He is a shareholder of the famous football team Hamburg and has pushed for the construction of a new opera house in Hamburg. In terms of port logistics, as a shareholder in 2021, he intends to promote the merger of two major German port operators HHLA and Eurogate to integrate major German port assets (as shown in the figure, HHLA controls the CTB, CTT and CTA terminals of the Port of Hamburg). 

Eurogate had a presence in the ports of Hamburg, Bremerhaven and Wilhelmshaven) to reduce internal competition, but the plan was eventually shelved.

The port community believes that Klaus-Michael Kuhne has a point and that his financial strength is not a problem, but that buying a stake from the city of Hamburg is bound to be difficult. Although the Port of Hamburg has always been among the top three container ports in Europe, the data shows that in recent years, it has fallen behind the competition with other ports.

In the first half of 2023, the Port of Hamburg handled 3.8 million TEU of containers, a decrease of 11.7% compared to the same period last year, and a greater decline than Rotterdam (-8%) and Antwerp Port of Bruges (-5%). HHLA's container division handled 2.876 million TEU in the first half of the year, down 14.6% from the previous year, and the Port of Hamburg segment handled 2.763 million TEU, down 12.7% from the previous year, of which the proportion of traffic from regional vessels fell to 18.4% (20.9% in the same period last year). 

In the first half, HHLA generated revenues of €727m, down 6.7 per cent, and earnings before interest, tax, depreciation and amortisation of €139m, down 27.3 per cent. In terms of share price, after its IPO in 2007, HHLA's share price was once more than 60 euros, and now it is just over 10 euros.

In terms of terminal operations, due to the closure of the Odessa terminal in Ukraine due to the conflict between Russia and Ukraine, HHLA has dropped out of the ranks of global container terminal operators in Delury. In international competition, the Port of Hamburg is not a deep-water seaport.

After the expansion of the Elbe waterway, the maximum draft depth is only 15.4 meters, which is worse than Rotterdam port, Antwerp Port of Bruges, and Gdansk Port. In addition, the Port of Hamburg currently has no major projects under construction, several automated terminals in Rotterdam Port, the Port of Antwerp Port Europa terminal have announced huge expansion projects, and the Port of Gdansk is also building a new berth.

This is due not only to the poor geography and lack of land in the Port of Hamburg, but also to the low level of public and private investment. Recently, the head of BLG Logistics Group (controlled by the Bremen city government, one of the two major shareholders of Eurogate, accounting for 50%) said at the German National Maritime Conference that German port policy needs to be fair to the importance of seaports for Germany and Europe, and the German government must be more involved in investment and financing. The current annual port subsidy of €38 million is far from enough.

Germany lags behind shipping companies in terms of port infrastructure and rear collection and distribution system, and only port enterprises and administrative departments can not make the necessary investment in wharf upgrading and other aspects, so the Dutch, Belgian and Polish ports have gained more market share, and Germany needs to invest at least 400 million euros per year to maintain the competitiveness of ports. Indeed, as BLG said, the expansion of the Port of Hamburg's competitors are all large shipping companies and port operators, such as MSC, Maersk, PSA, Hutchison Port, etc., while the Port of Hamburg's container terminal operators are not so diversified, and COSCO Shipping has just been introduced to foreign investment.

Part of the reason is that Germany, from the government to the public are more opposed to private capital control of public utilities, take football for example, even if the traditional strong team Hamburg has been involved in the German Second League for many years, but the team is still more opposed to Klaus-Michael Kuhne injection, HHLA equity acquisition is bound to be opposed.

However, in the face of increasing external competition, the Port of Hamburg has indeed reached the threshold of change, and Klaus-Michael Kuhne is a suitable candidate. He has sufficient financial strength to make acquisitions and subsequent investments, and does not want much in the way of commercial interests, is keen on the local public utilities of Hamburg, and has publicly stated that the shipping company should not earn such high profits during the Hapag-Lloyd epidemic, so he may come up with a takeover plan that will satisfy the government.

In addition, Hapalott, which he is one of the major shareholders, has continued to make port terminal investments in recent years, such as the acquisition of South American terminal operator SAAM, and has worked closely with Eurogate to develop and operate container terminals in Egypt in addition to taking a stake in Wilhelmshavn. HHLA can cooperate with Hapag-Lloyd in route logistics and other aspects. 

In terms of port terminal operation, whether Klaus-Michael Kuhne leads the resumption of the merger plan between HHLA and Eurogate, integrating several large ports in Germany, or cooperating with Hapag-Lloyd to develop terminals at home and abroad, there is imagination space. The ports of Antwerp and Zeebrugge benefit from the integration, and Germany is not necessarily unchangeable in its thinking. In any case, the German government and HHLA should increase port investment and welcome external investment with a more open attitude.