CK Hutchison’s $23 billion sale at the port raised concerns in the logistics industry that the deal could hurt competition and unfavourable rivals by making the world’s largest shipping company globally the top operator of container terminals.
The contract to sell 80% of the Hong Kong conglomerate’s global portfolio to a subsidiary of a Mediterranean transport company will fear industry analysts and executives will pass the management of Switzerland and Italian shipping lines, which will pass a significant amount of the world’s port infrastructure.
The impact of sales is “large” as one port industry executive said, and the proposed MSC contract raises “significant concerns” of rival transport lines regarding long-term access to port infrastructure.
Along with BlackRock’s infrastructure unit GIP in March, the consortium led by MSC-majority Port Operator Terminal Investment Limited agreed to buy shares at 43 ports in 23 countries.
Hutchison attacked the deal that China was already facing scrutiny by the Chinese government following complaints from President Donald Trump that China was “running the Panama Canal.”
If approved by regulatory authorities, MSC, owned by the Aponte family of billionaires, can jump above the major competitors of the port business and become the world’s largest container terminal operator.
“When considering the (master’s) shipping business, this (trade) could lead to a decrease in competition and an increase in barriers to other players’ entry,” says Kunkao, consulting Reddal.
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Another port sector executive said: “If you’re a delivery line and your biggest competitors suddenly have this (port) capacity, you’re naturally worried because you don’t want to give more revenue to your competitors, or risk not stopping you coming or giving the best berth window.”
People added that transport lines earn 10-15 times more profits from shipping containers than the port terminals did by unloading them, but that investments can “shrink up the ability to make more money and make as much money as possible.”
Proponents of the deal pointed out that Chinese people own a significant portion of the global port, with state-backed Chinese Cosco and Chinese merchants combining market share of more than 12%.
They also pointed out that the deal will result in MSC having market share, similar to PSA International in Singapore, which accounted for 7.2% in 2023.
However, analysts warned that the combination of being the biggest shipping group and the largest port operator could pass MSC a greater advantage over its competitors.
With this deal, MSC gives Mexico a great foothold in Southeast Asia – Hutchison is the largest player with four terminals, while Hutchison is Europe, the dominant operator in major ports including Rotterdam.
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Concerns over the massive expansion of MSC’s portfolio arise when ports in Asia and Europe are already facing the challenges of crowding, but new ship orders are at record highs as transportation lines reinvest post-pandemic profits.
Analysts warn that pressure will only increase at container terminals as new ships are flowing, increasing the value of MSC’s new control if Hutchison’s sales are confirmed.
Eleanor Hadland, senior associate at Drewry’s ports and terminals, said capacity growth in the port sector was “significantly lower” than it was 20 years ago, despite the additional container capacity being set up to increase.
Another shipping industry executive said the MSC BlackRock transaction is part of a much broader process of vertical integration in the industry, for example, companies such as Maersk where the APM terminal business exceeds the size of its own shipping fleet.
The two close to the deal dismissed concerns about MSC’s growing market advantage, and the deal included a legal commitment to continuing the terminal “without discrimination” and held on the same standards as today.
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However, the Chinese government’s critical stance over the contract, which had been around since March, also overshadowed the shadows.
The deal does not include 10 CK Hutchison ports in mainland China and Hong Kong, but Beijing criticised the deal, saying it would undermine “national interests” by giving the US the opportunity to curb China’s shipping and trade.
China’s anti-trust regulators say they will begin reviewing the deal. The consortium held consultations with China’s anti-trust regulators. This is reported this week as we are trying to secure approval.
MSC declined to comment.
Lars Jensen, chief executive of consulting firm Vespucci Maritime, said the fear that MSC would abuse its position is exaggerated. “Here, MSC definitely has a valuable competitive advantage. However, this deal allows the competitors to make more money from the vessel, rather than exacerbating them.”
Robbert Van Trooijen, founder of Shipping and Ports Advisory Inception Partners and former Maersk executive, said small operators still fear they will be under pressure as competition for port access grows.
Nevertheless, he noted that concerns about the vertical integration of carriers developing large ports and logistics portfolios “can be a difficult case to discuss with regulators.”
Rico Luman, senior economist at ING, focusing on transportation and logistics, said:
Reddal’s CAO said the impact on port infrastructure could allow MSC to access sensitive delivery data that can be used for competitive advantage.
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Antitrust regulators, including those that oversee the major container terminal operators owned by Hutchinson in Rotterdam, appear to be “hardly interested in transactions” given their size and size. This could potentially extend the time required to complete the transaction.
Those with knowledge of the trade confirmed that antitrust concerns about several terminals, including Rotterdam, were “on our radar screens.”
The consortium added that it was ready to drop several ports in the face of antitrust concerns.
“We may have to give up on the terminal (again). (And) we’re ready to do that.”
Additional Reports by Ivan Levingston and Arash Massoudi of London
