MSC stake in Terminal Investment could make it global leader in container terminals after Hutchinson sale

CK Hutchinson’s $22.8 billion sell-off of all Hutchinson Ports business outside of China and Hong Kong to the BlackRock-Terminal Investment Ltd consortium could result in shipping giant MSC becoming the biggest container port operator globally.

MSC owns 70% of Terminal Investment Ltd (TIL) and according to analysis from maritime consultant, Drewry, the strategic benefits of the acquisition, which includes 43 terminals, may outweigh the costs, reinforcing the trend of hybrid operators gaining market dominance.

As MSC’s container line shipping services already call at many of the ports currently owned by Hutchinson Ports, the buyout will ensure that more of MSC’s expenditure on terminal handling is retained in house and it keeps a degree of operational control.

If the buyout of terminals is approved, MSC could be in control of an equity-adjusted global terminal capacity equal to 220m TEU by 2028, equal to 15% of the global market, according to data from Drewry. That would put it out in front of the current leading container terminal handler, PSA International, which is forecast by Drewry to have terminal capacity equal to 150m TEU by 2028, equal to 10% of the global market. 

Read about automated container handling targets at PSA Singapore

In 2023, the MSC portfolio of companies ranked seventh, with 42.3m TEU capacity, behind PSA’s 62.6m TEU capacity share. Hutchinson ranked sixth in 2023, with 43m TEU capacity, according to data presented by Drewry this week.

Protection in Panama 
Among the 43 terminals that BlackRock-TIL is aiming to buy from Hutchinson (subject to a review of market concentration in northwest Europe – see below) are the Balboa and Cristobel terminals at either end of the Panama Canal, currently operated by Panama Ports, in which Hutchinson has a 90% stake. Those terminals have been the focus of attention recently because of false claims by Donald Trump that they are under Chinese ownership, with the US president vowing to “take back” the Panama Canal. While such a major terminal buyout has been in progress for some time, Trump’s election and threat of lawsuit has probably affected the progress of the deal, according to Eirik Hooper, senior associate in Drewry’s Ports and Terminals maritime research team.

“The protectionist rhetoric in the run up to the election and the shift in sentiment towards Chinese, and more recently to Hong Kong companies, will have been a factor in CK Hutchinson’s decision to largely withdraw from the global port sector,” said Hooper.

CK Hutchinson, which owns 80% of Hutchinson Ports, is based in Hong Kong.

At the same time, while Trump’s protectionist rhetoric may have had an influence on the pace of the BlackRock-TIL buyout of Hutchinson’s terminals outside of China and Hong Kong, MSC has sought to placate the US administration with a commitment to invest $20 billion in the development of shipbuilding, port infrastructure, automotive logistics platforms and warehousing in the US.

Terminal velocity 
MSC was the fastest growing terminal operator in 2023 and its existing portfolio of business is forecast to add 30m TEU to its capacity by 2028, without the business gained from Hutchinson Ports.

At the end of 2022 MSC bought Bolloré Africa Logistics through its Shipping Agencies Services (SAS) division, with the deal valued at $6.3 billion. That business is now MSC’s Africa Global Logistics (AGL) division. Last year the SAS subsidiary also bought a majority stake (56.5%) in Brazilian port and maritime logistics operator Wilson Sons for $764m. 

SAS Shipping Agencies Services also boughT Gram Car Carriers last year in a deal valued at around $693.3m

Last year also saw MSC take a 49.9% stake in Germany’s Hamburger Hafen und Logistik Aktiengesellschaft (HHLA), a key port operator in Hamburg, previously fully owned by the City of Hamburg.

MSC has four other M&A deals pending, as well as six concession agreements involving either TIL or AGL.

According to Hooper targeted mergers and acquisitions like these give MSC market share that it would otherwise take decades to achieve through organic growth. That is in part because of the boom in long-term privatisation at container ports that characterised the 1990s, which was when Hutchinson built up its portfolio of terminals including those in the Netherlands, UK, southeast Asia and Latin America. Long-term concessions such as Hutchinson has can be a barrier to entry for other operators, who are also facing significantly lower growth rates.

Hooper said that Hutchinson has continued to benefit from the ‘first mover’ advantage it secured more than 20 years ago and is the dominant operator in major ports including Rotterdam (Netherlands), Laem Chabang (Thailand) and Karachi (Pakistan). “It is the largest player in the Mexican market with four terminals and it holds significant stakes in terminal operators in Port Klang [Malaysia] and Jakarta [Indonesia],” he added.

That advantage now stands to benefit MSC through its stake in TIL and the financial input of BlackRock.

Competition in Europe 
At this stage Hooper said the deal confirms that hybrid operators – terminal operators owned by carriers – are gaining the upper hand in the container market.

“While the enterprise value indicates that the BlackRock-TIL consortium has paid a premium for this portfolio, on balance, the strategic benefits likely outweigh the additional cost,” he said. “M&A is often now the only way to overcome barriers to entry in the sector.”

However, Hooper also warned that competition concerns may see some secondary transactions arise resulting from assessments of excessive market concentration, specifically in northwest Europe. TIL has a significant presence in the ports of Antwerp (Belgium), Bremerhaven (Germany) and Le Havre (France), and as noted, MSC now has a sizeable stake in HHLA at the German port of Hamburg. Meanwhile, Hutchinson is the majority stakeholder in ECT Rotterdam, the largest terminal operator at Europe’s biggest container port. TIL is also a major operator at the Spanish port of Valencia while Hutchison controls the largest terminal in Barcelona. This concentration is expected to attract the attention of the European Commission’s Directorate-General for Competition.