(Observer Network News) After more than a year, the matter of "Chinese enterprises investing in the port of Hamburg, Germany" has finally ushered in key progress. According to the German news agency, on Wednesday (26th) local time, the German government finally approved a compromise plan that allowed COSCO SHIPPING Port Co., Ltd., a subsidiary of COSCO SHIPPING Holdings, to acquire a 24.9% stake in the container terminal of the Port of Hamburg, Germany.
On the same day, COSCO Group and the equity seller Hamburg Port and Logistics AG (HHLA) also announced the news in a prominent position on the homepage of the company's website. Angela Titzrath, chairman of Hamburg Port & Logistics AG, welcomed the decision and said further communication would be made with COSCO Shipping in a timely manner.
It should be noted that this acquisition is less than 35% of the original plan, which also means that COSCO Shipping Holdings, as a "minority shareholder", will not be able to obtain operational decision-making rights in the Port of Hamburg. However, German media previously quoted people familiar with the matter as saying that the other 10% of the shares will be transferred after a "freezing period". The German government statement also pointed out that new Chinese acquisitions in the future require new investment review procedures.
Chinese investment in the Port of Hamburg is not only beneficial to Chinese companies, but also crucial to the German economy. The Port of Hamburg has always been an important hub and distribution center for Chinese goods to Europe. The local government in Hamburg is worried that the withdrawal of Chinese capital will benefit rival ports such as Rotterdam and Antwerp. The German Chancellery, on the other hand, pushed the public after the opposition of six departments, ordering the federal department to "find a compromise" and "give the green light" for Chinese investment in shares.
On the other hand, up to now, COSCO SHIPPING Ports has invested in 46 terminals in 37 ports around the world, operating a total of 367 berths. Some German media have described that the Port of Hamburg will be the "last link" of COSCO's layout in Europe. In addition to sea routes, Hamburg is also an important node in the land transport between China and Europe under the "Belt and Road". According to the official website of the Port of Hamburg, the volume of rail traffic between Hamburg and more than 25 destinations in China in 2021 increased by 51% compared with the previous year.
Screenshot of the homepage of HHLA and COSCO Shipping
Germany allows Chinese investment in 24.9%
In September 2021, COSCO SHIPPING Ports, a subsidiary of COSCO SHIPPING Group, said it planned to acquire a 35% stake in the "Fudi" terminal of the Port of Hamburg in Germany for 65 million euros, for 65 million euros. For more than a year, there has been no consensus within the German federal government on this acquisition, and there has even been news that it will reject the acquisition.
On October 26, the German Federal Ministry of Economic Affairs and Energy issued a statement that the German cabinet meeting partially approved COSCO Shipping's investment, that is, the group can only acquire less than 25% of the shares of "Fudi" terminal, and prohibits further acquisitions above this threshold; Even in the future, new acquisitions will require new investment review procedures.
The German Ministry of Economy and Energy also said that COSCO Shipping was prohibited from enjoying special rights in order to prevent China's strategic participation in the terminal and reduce the acquisition to pure financial participation. In addition, COSCO will also be prohibited from giving itself veto power over strategic business and personnel decisions in contracts. The German government claimed that the reason for the restrictions on the acquisition was concerns about potential risks to public order and safety.
Why the figure 24.9%? According to Germany's new Foreign Trade Regulations, if a foreign investor intends to acquire more than 10% of the country's critical infrastructure, it needs to be approved by the federal government; If the facility is not classified as critical infrastructure, government approval is not required for acquisitions of less than 25%. Since the operating company of the Port of Hamburg is not classified as critical infrastructure, the 24.9% share of the acquisition means that the federal authorities can no longer raise objections this time.
According to Bloomberg, in Germany, the 24.9% ratio is considered to be lower than the level of "a blocking minority", and if the deal is completed, COSCO Shipping, as a minority shareholder, will not be able to obtain operational decision-making power in the Port of Hamburg.
However, according to Deutsche Welle, China Table, an online media focused on China, previously quoted people familiar with the matter as saying that the other 10% of the stake would be transferred after a "freezing period", and China would need to prove that it was a reliable partner during the "freezing period".
Screenshot of the statement of the German Ministry of Economic Affairs and Energy
On the same day, COSCO Group and the equity seller Hamburg Port and Logistics AG (HHLA) also announced the news in a prominent position on the homepage of the company's website. Angela Titzrath, chairman of Hamburg Port & Logistics AG, welcomed the German government's decision and said it would hold talks with COSCO in the near future.
Tizlet also said that the deal strengthens the future viability of Hamburg Port & Logistics AG and guarantees employment at the Port of Hamburg. She stressed that the company hopes to continue to smoothly develop the 40-year-old business relationship with COSCO Group.
"Open and free global trade is the foundation of a city like Hamburg. China accounts for 20 percent of global economic output, far surpassing the United States. Companies like HHLA must have good relations with their trading partners in China and want to do so. The company's press release reads.
COSCO Group stressed in the announcement that the parties have not yet received the formal decision of the relevant partial approval of the department, and will consider the relevant conditions after the department issues its decision, and the company will make further announcements in due course or when necessary in accordance with the Listing Rules. The announcement also stated that the transaction will be effected only after the conditions precedent are fulfilled or waived, and there is no guarantee that the transaction will proceed or when.
Screenshot of COSCO SHIPPING's announcement
The German Chancellor pushed the crowd
The Port of Hamburg is an important logistics hub for the transportation of goods by sea and mainland between China and Europe, and the "Fudi" terminal is one of the four container terminals in the Port of Hamburg and is currently the smallest, and COSCO intends to build the "Fudi" terminal of the Port of Hamburg into the premier transshipment hub in Europe.
When news of the deal first broke last year, it didn't actually attract the attention of the German government. However, after the outbreak of the Russian-Ukrainian conflict, six federal departments involved in investment review, including the German Ministry of Economic Affairs and the Ministry of the Interior, claimed that China might use its economic influence to implement its geostrategic interests, and opposed Chinese investment. These departments also asserted that if the deal is concluded, COSCO SHIPPING will not only have financial participation, but also have a say in decision-making; In addition, since China is already a major customer of the port, there is a possibility of "potential coercion" if it participates in the construction of the container terminal.
However, the German Chancellery has chosen to side with the German business community and is striving to complete the acquisition by the end of this month. According to Norddeutsche Radio and West Deutsche Radio (WDR), Chancellor Scholz had previously ordered federal departments to "find a compromise", giving COSCO Shipping the "green light" to take a stake. He publicly stressed that this was not a sale of the Port of Hamburg, but a minority stake in the terminal.
The 31st of this month is the deadline for the acquisition to be concluded. German law stipulates that a transaction is legally considered automatic if the government does not pass a resolution prohibiting or extending the deadline before the deadline ends.
Despite waves of opposition, the Port of Hamburg itself is eagerly looking forward to Chinese ownership.
Scholz was mayor of Hamburg for nearly eight years before becoming Germany's finance minister in 2018. During this period, Hamburg Port & Logistics AG has put COSCO's stake in the Port of Hamburg "Fudi" terminal on the agenda. The Port of Hamburg hopes that Chinese ownership will bring greater and sustainable "planning certainty" to its container terminals, increase the port's cargo throughput and strengthen its position in competition with other ports.
In addition, the Port of Hamburg is concerned that if the deal fails, COSCO may move its operations to larger rivals such as Rotterdam and Antwerp.
Hamburg Mayor Peter Tschentscher also said a few days ago that the inclusion of Chinese investment will not pose any threat to Germany's critical infrastructure, because the Hamburg Port Authority will still control 100% of port operations, and "35% of the shares will not lead to COSCO Shipping gaining strategic influence." He stressed that COSCO SHIPPING Ports will only be a "tenant" of the terminal, and the terminal itself will still be fully owned by the Hamburg City Government.
The dpa news agency also noted in the report that similar participation is common internationally. For example, German shipping company Hapag-Lloyd has a stake in Altenwerder, another terminal in the Port of Hamburg, and Danish logistics company Maersk has a stake in a terminal in Bremerhaven. COSCO itself already holds stakes in eight terminals in Europe.
An in-depth report on the incident by China Table on October 24 also mentioned that COSCO's stake in the Port of Hamburg would be its 98th international investment. Since 2016, COSCO Group has held a 35% stake in Euromax Rotterdam, which handles more containers than all German ports combined.
"One out of every three containers in the Port of Hamburg comes from or goes to China"
Business in China is the absolute main business of the Port of Hamburg. In 2021, container trade between the Port of Hamburg and China grew by 5.5 percent to 2.6 million TEUs, cementing China's position as Hamburg's most important trading partner to date.
Photo from the official website of the Port of Hamburg
In the first half of 2022, the Port of Hamburg handled 4.4 million TEUs (TEU), of which in terms of trade with China, the Port of Hamburg handled a total of 1.3 million TEUs, an increase of 5.8% year-on-year, ranking first among the main trading partners of the Port of Hamburg, with the United States (291,000 TEU) and Singapore (218,000 TEU) ranking second and third respectively.
Pan Hua, chief representative of the German Hamburg Liaison Office in China, told First Financial Reporter that the Port of Hamburg has always been an important hub and distribution center for Chinese goods to Europe, and "one out of every three containers in the Port of Hamburg comes from or goes to China."
COSCO Shipping Holdings, which has invested in the Port of Hamburg, mainly operates international and domestic maritime container transportation services and related businesses through its wholly-owned subsidiary COSCO SHIPPING Lines and its indirect holding subsidiary, OOCL International.
According to the company's annual report, as of the end of the 2021 reporting period, COSCO SHIPPING Holdings operated a total of 294 international routes (including international feeder lines), 54 Chinese coastal routes and 84 Pearl River Delta and Yangtze River branch lines, calling a total of 548 ports in about 139 countries and regions around the world. In terms of port business, as of the end of the reporting period, COSCO SHIPPING Ports, a subsidiary of COSCO SHIPPING Holdings, invested in 46 terminals in 37 ports around the world, operating a total of 367 berths, including 220 container berths, with a total annual processing capacity of 141 million TEUs, and a yard network covering five major coastal port groups in China, Europe, South America, the Middle East, Southeast Asia and the Mediterranean.
German media "Deutsche Welle" refers to COSCO Group as the world's third largest maritime operator, and there are 14 important European ports such as Rotterdam in the Netherlands, Bilbao in Spain, Piraeus in Greece and Wado in Italy. The Port of Hamburg will be the "last link" of COSCO's European layout.
COSCO has also publicly recognized the importance of the Port of Hamburg. Zhang Dayu, managing director of COSCO SHIPPING Ports, said in an interview with the media in September last year that Hamburg's "Fudi" terminal is an important node in European logistics, with unique natural conditions such as location and water depth, a vast hinterland, broad future prospects and great development potential. "We expect this investment to strengthen our partnership with Hamburg Port & Logistics AG and complement each other's strengths to provide customers with a higher quality of service," he said. ”
In addition to sea routes, Hamburg is also an important node in the land transport between China and Europe under the "Belt and Road". According to the official website of the Port of Hamburg, in 2021, the railway traffic volume between Hamburg and more than 25 destinations in China was about 160,000 TEUs, a strong increase of 51% over the previous year.
Regarding the news that the German government agreed to COSCO Group's acquisition of 24.9% of the shares of the container terminal in Hamburg, Germany, Chinese Foreign Ministry spokesman Wang Wenbin said in response to an inquiry on the 26th that cooperation is mutually beneficial. We hope that relevant parties will rationally view China-Germany pragmatic cooperation and stop groundless speculation.
This article is an exclusive contribution of Observer.com and may not be reprinted without authorization.