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After substantial profit, MSC opened a frenzy of buying mode

Last month, companies disclosed their financial results for the third quarter of 2020, as a surge in freight rates left shipping lines with enough money to buy ships.Shipping Industry Net has previously reported that MSC could soon overtake Maersk as the world's largest shipping company if this continues.

 

 

In the past few months, MSC has spent heavily on used ships and has raised about $260 million from private investors since August based on the declared prices of 13 ships it purchased (ranging from 1,730TEU to 8,500 TEU) and market valuations of three other ships, according to Alphaliner data.More than 282 million dollars was spent in the last four months.

 

Of course, at the current stage of COVID-19 epidemic, it is MSC's traditional strategy to buy at a time when the value of ship assets is low. By acquiring a large number of second-hand ships, MSC can increase its fleet and lease these ships at the same time.With daily rents and global trade demand rising, there is a high risk of losing market share if there is not enough capacity to book space.

 

The wave of MSC purchases includes the purchase of a 5,642 TEU 'GranvilleBridge' and its sister ship 'GreenvilleBridge' from Japanese owner Doun Kisen.Purchased Bomar Hermes, a liner container ship 2510TEU;Purchased 6 large container ships of 7500-8500TEU from German shipowner company for usd 158 million;Bought another Baltic East for $10m from South Korea's Changjin merchant ship;Purchased 4,992TEU "Texas Trader" from UK's Lomar Shipping;Acquired the 2,732TEU 'Telemann' from Borealis Finance;It acquired 8,236 TEU 'YM Uberty' from Yangming Shipping for $27 million, etc.It is understood that MSC has purchased container ships from owners for more than 18 times.If all publicly available transactions are confirmed, MSC will have about 206 ships.

 

According to the latest data from Alphaliner, the current capacity of MSC is 580 vessels of 3,863,454TEU, approximately 144 owned vessels and 436 chartered vessels.MSC are more vulnerable to the volatility of the charter market, so MSC has to accelerate the purchase of its own ships to better consolidate its development by increasing the number of its own ships.

 

In addition to buying used ships to put into the market, MSC has also expanded its capacity by buying large container ships.After lengthy negotiations, orders for six 24,000TEU MSCS were awarded to three Chinese shipyards for a total of $900 million.

 

All told, the buying spree is expected to add 100,000 TEU to Mediterranean's total capacity.

 

Surpass Maersk to become world number one?

 

The acquisitions have fuelled speculation in the industry that MSC could soon overtake Maersk as the world's largest shipping company.

 

The two companies have been the world's largest and second-largest shipping lines since 2004, but the capacity gap is narrowing, according to Sea Intelligence, a Danish analyst, while MSC needs only to launch a new line of very large ships to overtake Maersk.

 

But Mr Seaintelligence adds that Maersk's strategy is now focused on profitability rather than fleet size.

 

"The loss of the no. 1 spot, which it has held for 25 years, is still likely to have some emotional impact on Maersk," analysts said.

 

Carriers have focused on ordering the largest ships to achieve maximum economies of scale, leading to a tonnage shortage of medium and large public ships.But given its preference for owning its own assets, Maersk is unlikely to charter ships.

 

Braemar ACM, a London-based shipbroker, says carriers often have a "shopping appetite" after making a profit.

 

MSC is in negotiations with several Chinese leasing companies for order finance and is seeking better terms to match the current freight market and the company's earnings recovery.Leasing company is not willing to do so, however, it remains to be seen on the one hand, because of its market supply and demand change, the most important is the owner's side when choosing shipyard will lease financing company, after all, Chinese Banks still have to support domestic shipyard, not in Chinese yards order, it is difficult to obtain preferential loans of Chinese Banks.

 

From the feedback of marketing personnel, the purchase of ships is not smooth.As the global supply and demand situation changes as a result of the COVID-19 epidemic, shipowners are making a lot of money and buying ships to increase their capacity and market share.At the same time, South Korean shipyards are offering "very attractive prices" for new ships and pushing down the average price.This has made it difficult for Chinese yards to compete on price.

 

After a decade of excess capacity in the shipping industry, supply and demand in container transport are returning to balance.With trade demand surging in the second half of 2020 due to the sudden impact of COVID-19, low levels of capacity supply will help balance the shipping market, and with owners upgrading their fleets and dismantling old containers, there is a real case for owners to exercise restraint while upgrading their fleets.