Economist Vöpel considers Hamburg's port strategy risky
Professor Vöpel, the Hamburg Port has experienced years of declining market share in international competition. How do you assess the plan for the world's largest container shipping company MSC to acquire up to 49.9% of the Hamburg Hafen und Logistik AG (HHLA)?
It seems more like an act of desperation than a strategic move. The Senate knows that the structural decline in the port's significance is hard to reverse. Instead of developing an entirely new location strategy, they are attempting, perhaps as a last-ditch effort, to save the port through this deal. I consider this strategy to be very risky because we don't know enough about MSC's mid-term and actual strategic intentions. Their involvement in HHLA doesn't necessarily mean they believe in Hamburg; it's likely part of a larger strategy to gain additional strategic options. However, this could also backfire on Hamburg if other shipping companies, such as Hapag-Lloyd, divert cargo elsewhere. An argument for the Senate could be that this entry could fund additional investments in cost efficiency and break down the entrenched practices in the port through increased competition.
Hamburg chose MSC, even though the federal government aims to decide on a national port strategy by the end of the year. Should Hamburg have waited for this decision?
Likely, it would have been wiser to wait. Unless they had inside information. In that case, seizing the opportunity to outmaneuver others could be rational. However, for long-term relationships, this would be disastrous and short-sighted, especially considering that Hamburg alone cannot do much, particularly against resistance from Bremen and Lower Saxony.
The coastal states and the port industry have called for a "turning point" in the financing of seaports. They claim that around €400 million is needed for infrastructure in the ports, which falls under the responsibility of the states. How do you view the prospects of German seaports in competition?
From the ports' perspective, the demand is understandable, but from a market perspective, it may be exaggerated. The European market already experiences overcapacity. From economic theory, we know that under certain conditions, oligopolistic markets create overcapacity. They compete for a more or less constant share of the market and overinvest to gain a larger piece. The ports are powerless against the increased market power of the shipping companies and are entering into a destructive competition in a market whose growth is not dependent on port investments but rather on economic growth and global trade.
How should the planned MSC entry be evaluated in light of the fact that even after the recent Elbe deepening, the Hamburg Port still faces disadvantages in terms of accessibility for large vessels?
This suggests that MSC might not see the Hamburg Port as a central hub but rather as a strategic addition to their existing network. The announcement of relocating their headquarters to Hamburg might have been important for the Senate, but it likely doesn't play a significant practical role.
By far the largest trading partner of Hamburg's port is China. To what extent is the MSC deal aimed at reducing the risk of dependency on trade with China?
This may indeed have played a role in the considerations. Fundamentally, it's a way to diversify risks and, especially, one-sided dependencies. However, the primary risk is not necessarily the dependence on shipping companies but rather on China as a trading partner. Therefore, one would need to examine how trade flows are shifting and where new business fields are emerging. Possible energy imports from Latin America might already be a part of this.
In the context of MSC, the offer to purchase the HHLA share is also portrayed as an attempt to curb Chinese influence in Europe. That's why MSC has also invested in terminals in the ports of Rotterdam and Antwerp. What do you think of this motive?
Yes, this is plausible and highly likely. The competition among shipping companies revolves around global dominance and market power. Getting caught in the middle of this game can lead to unexpected consequences, especially for politics. Hamburg might be playing in this game for now, but it's a bit too large for them – and for good reasons, a city should not engage in this game, especially with public funds. This went wrong during the financial and shipping crisis after 2008.
In the Port Development Plan of the Hamburg Senate and the Hamburg Port Authority (HPA) of October 2012, the handling potential in container traffic was estimated far too optimistic at 25.3 million standard containers (TEU) in 2025, as we know today. What handling development can be expected in the Port of Hamburg in the coming years?
At the time, the very positive development from 2000 to 2008 was simply extrapolated. For anyone who understands anything about growth processes, it was clear that such simple modelling cannot be correct, but that growth will flatten out. And indeed, after 2008 a structural break can be seen for Hamburg. Since then, market shares have been lost with every crisis, which clearly points to structural problems. I don't expect more than 10 million TEU per year until 2030.
How will competition with the other major North Sea ports develop? Will Hamburg lose further market share to Rotterdam or Antwerp-Zeebrugge in the medium to long term?
Yes, there will be displacement. That is precisely what the Senate has obviously not fully understood. An oligopolistic market works very differently. But with a little game theory you can understand the market.
The logistics entrepreneur Klaus-Michael Kühne would be interested in a majority takeover of HHLA. Would it be better for the Port of Hamburg if the City of Hamburg gave up its control of HHLA?
Yes, it is problematic when the city enters into a strategic partnership with public money in a market where there is no competition. Public investments ultimately serve private profits. Why should the taxpayer invest in infrastructure that no longer serves the general security of supply but individual players?
Hamburg hopes to attract more cargo and investments to the port. What does an MSC deal promising a handling volume of at least 1 million TEU in Hamburg from 2031 onwards mean, especially if other shipping companies could withdraw larger cargo volumes from the Hamburg Port in return?
A commitment of 1 million TEU is essentially insignificant. They already handle 0.5 million. The commitment increases to 1 million by 2030. When considering possible cargo shifts by Hapag-Lloyd, there's hardly anything left in the balance.
