Marcon International, Inc. Sunday
Feb 25, 2018
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One World, One Tug Company? - Oct 2001

By: Jack Gaston & Hugh Ware

A European towage firm will dominate the world's ship-assist tugboat operations some day. Bold prediction or incoherent rambling? We may find out within a few years.

'Globalization' is the current buzz word in several sectors of the European towage market. Its possibilities reach into every corner of the major towage organizations because there are significant efficiencies in being large and operating world-wide. Towage rates in Britain, Europe, and many shipping centers around the world have fallen dramatically over the past decade and several factors are to blame, some local, some global. Locally, small operators with less-than-state of the art vessels have nibbled away at the edges of some of the bigger fleets' business. Globally, it is a fact that many of the ship-towage big names with widespread operations no longer deal with the local ship agents in each port. A towing company's salesman can go directly to a shipping-company headquarters, whether it be in Singapore, Hong Kong, or wherever, and negotiate a 'global deal' - a special rate if the shipping company uses 'our' tugs in all ports at which the company's ships call. The rate per tug may be lower but the aggregated income can be impressive.

What happens when a major shipping giant 'globalizes' by buying out a whole inventory of tug fleets. Ah! That is the question. But let's first review the players, which include Smit, Wijsmuller, Adsteam, and a late player on the scene, A. P. Møller. Their actions to date may provide clues as to future moves.

In mainland Europe, Smit International has been supreme in the field of 'globalization' and was exercising its aspirations before that buzz word was invented. One of the traditional masters of towage and salvage, the Dutch company has been acquiring tugboat firms worldwide or making alliances for several decades. Smit-International is now a complex group of inter-related deep-sea towage, salvage, ship-handling, and other companies including Smit Americas.

Within Europe, Smit acquired Sleepdienst Jan Kooren BV, one of the last remaining independent ship-towage companies in the Netherlands, in early 1999. In Rotterdam, Smit's home base, the company has formed an alliance with the competing German firm Fairplay. Under this arrangement, two of Fairplay's powerful ASD tugs have been chartered to Smit and the entire operation of shiphandling vessels is now in the hands of the Smit towage control center. Smit has restructured its operation in Holland and Belgium and enlarged its stake in the very large Belgian URS tug fleet in Antwerp, Zeebrugge, Flushing, and Terneuzen. This arrangement has also brought about the restructuring of the Flushing towing and salvage company Van den Akker. However, the company's attempt to compete effectively with the established towage organizations in Hamburg failed earlier this year due to falling profits and Kotug has taken over some of Smit's contracts. At present, Smit's only incursion into Britain is the formation of a marine services company, Smit (Scotland) Ltd, which provides mooring and jetty services at the Hound Point oil terminal in the Firth of Forth.

Smit occasionally joins with arch rival Wijsmuller in certain enterprises. One example is the SmitWijs-managed Global Towing Alliance, which was originally composed of four Smit deep-sea and salvage tugs and two similar tugs from Wijsmuller. South Africa's Pentow and China's C.O.E.S.S have joined the Alliance, bringing with them a number of Chinese tugs such as 'De Yue,' a very long-range towing and salvage tug rated as third largest in the world, and one of Pentow's mighty duo of 19,200-hp salvage tugs , the 'John Ross' and 'Wolraad Woltemade.' The other tug is stationed in South Africa during much of the year for salvage and rescue.

Then Smit acquired Pentow Marine of Cape Town, which was already part of the Smitwijs Global Towing Alliance. The company now trades as Smit-Pentow Marine and continues to operate much as before. Next, in May 2000, Smit acquired RivTow, a large Canadian towing firm based in Vancouver. RivTow does mostly log and log-barge towing but has ship-docking companies at Vancouver, Westminster, Kitimat and Prince Rupert. This acquisition should allow Smit to size-up the Pacific Northwest scene at leisure. Interestingly, as of mid-summer, one of Dennis Washington's companies, Washington Group International, a major construction company filed for voluntary bankruptcy due to problems caused by their acquisition of Raytheon Engineers & Constructors. Washington Group is reportedly well on the way to resolving this problem and this apparently has no impact on Mr. Washington's investment in either C.H. Cates or Seaspan International. Both Cates and Seaspan are competitors of Rivtow.


Smit's principal Dutch-based competitor has traditionally been that other towage giant, Wijsmuller. The Wijsmuller group of companies provide harbor and terminal towage as well as salvage and some offshore services.

Wijsmuller continued its worldwide expansion last year when it purchased Cory Towage, itself built up to be a major tug operator in the United Kingdom by careful acquisitions over more than one hundred years. Among Cory operations were the Halifax-based Eastern Canada Towing and a overseas management contract in the Yemen. This year, Wijsmuller purchased the Swansea-based ship towage operations of West Coast Towing (UK). The four tugs there primarily serve a major steel plant at Port Talbot in Wales. Wijsmuller also purchased two other West Coast Towing tugs to strengthen its position in the upper reaches of the Bristol Channel. But soon after, Wijsmuller's long corporate existence suddenly ceased when it was bought by the next player.

A.P. Møller
Earlier this year, A. P. Møller, the giant Scandinavian shipping group, took over the entire Dutch Wijsmuller organization in a surprising but friendly transaction. The deal is rated as being equivalent to Møller's acquisitions of SeaLand and Safmarine. The new combine will be operated through Em. Z. Svitzer, a Møller subsidiary and one of the oldest towage and salvage companies in the world. Svitzer is now one of the world's largest companies in the towage and salvage field because the combination of the Svitzer and Wijsmuller businesses created a diverse marine services organization operating a fleet of 230 vessels and employing more than 1600 people in 23 countries on all five major continents plus Australia.

The company will continue to use the Svitzer name in northern Europe and the Wijsmuller name elsewhere. Future growth is expected to be concentrated in Asia, the Middle East, and South America. At the time of writing, the possible effects of the A. P. Møller takeover on Smitwijs and the Global Towing Alliance are unknown.

The new A.P. Møller empire makes similar established combines look puny in comparison. Not only are the possibilities of conducting business on a global scale seemingly endless but one must also take into account that the giant Maersk Shipping Group is also part of the A. P. Møller empire. One can only guess at the bottom-line effects for Maersk container and tanker fleets from having an associate with tugs in so many of the world's ports!

Howard Smith
For some years, Howard Smith Towing was the major player in the Australian towage business along with rival Adsteam Marine. However, Adsteam and Howard Smith operated jointly in several Australian ports, sharing ownership of 61 tugs. Howard Smith was also an important force in the U.K. towage market, along with Cory/Wijsmuller. But Howard Smith's real interests lay elsewhere else and it became apparent recently that a decision to either grow or sell the towage end of the business had to be made. That decision was made earlier this year and resulted in the sale to Adsteam. Incidentally, very shortly after, Howard Smith was itself taken over by a predator in the logistics business.

Australia's Adsteam (a name derived from 'Adelaide Steamship') was merely continuing its policy of aggressive growth when it purchased Howard Smith Towing for more than AU$500 million (US$ 246 million). Interestingly, that price was twice Adsteam's current market capitalization. The combined fleet has 156 tugs and Adsteam now operates in forty-plus Australian, Indian, Pacific Oceana, and British ports. Note that the merger places Adsteam in position to use the United Kingdom as a base for expansion into European towage markets.

Adsteam has made other overseas purchases recently although they were not in the ship-docking area. Last year, it bought 50% of Northland Services of Seattle. The firm barges petroleum products and containers to and in Alaska. Adsteam also bought 50% of New Zealand-based Sea-Tow Ltd with an option to purchase the other 50%. The firm is New Zealand's largest barging outfit but lacked sufficiently consistent business. Bob Beegle predicted in Marcon's May 2001 newsletter, 'Reportedly Northland/Adsteam is also picking up Brice Construction out of Alaska and we would not be surprised to see a move into Europe within the next 6-9 months' and half of that prediction has come true. Although Adsteam has suffered a drop in profits this year and a consequent sag in investor confidence, it is basically a strong, well-run company and will grow again.


Possible Players and Spectators
In the arena of coastal Europe, Rotterdam-based Kotug, under the leadership of wily Ton Kooren, made two power moves by more-or-less simultaneously invading German markets and inventing a powerful, multi-purpose tug with three azimuthing thrusters, the 'Rotor Tug.'™ Kotug moved into Hamburg in 1997 and into Bremerhaven in 1998. To man its German-based fleets of four Rotor tugs and several modern azimuthing stern drive tugs, most with more power than the competition's tugs, Kotug employed East Germans, using them in three-man crews. Results were profitable and prompt; Kotug claimed to have obtained 60% of Hamburg's ship-assistance business within three months while there were reports that competing firms were laying-up tugs and dismissing crews. But complaints by German operators that the Dutch government was including harbor-tug operators in a scheme intended to subsidize deep-sea Dutch maritime interests led the European Commission to investigate. Those charges have since been substantiated and it looks as though changes will have to be made.

An early reaction to the Dutch tug invasion of German ports was the Hamburg-based towage company Fairplay's deployment of four ASD tugs, the newbuilds 'Fairplay 21' through 'Fairplay 24', into Rotterdam. Going head-to-head with Smit in the Rotterdam ship-docking market was a most-aggressive move and it apparently paid off because earlier this year, as previously noted, Fairplay and Smit entered into a 'Joint Service' agreement in Rotterdam.

France sees no acquisition activity because monopoly rights at each major port are assigned to a docking-tug company for one year at a time. Les Abeilles International holds most of the important monopolies and has recently built a fleet of tugs specially designed for each port. Since its founding in Le Havre, France, in 1864, LES ABEILLES has extended its geographic reach not only nationally in France but also internationally in Africa and the South Pacific with a fleet of some 100 tugboats.

In the United States, acquisition of ship-docking and barging companies has been slower-paced and most such activity took years ago. There are now several major regional tug operators, including Foss, Crowley, Moran, Seabulk (ex-Hvide), and Great Lakes Towing, but no one firm predominates nation-wide and none seems particularly aggressive at the moment if one exempts the recently successful attempt of The Great Lakes Group's subsidiary Tugz International to replace or join Seabulk in Port Everglades (and possibly other southern ports later) where Hvide/Seabulk has maintained a benign harbor-docking monopoly for many years.

Asian operators are stretching their muscles too, and one should also keep an eye on developments there. But not everyone is completely happy. For instance, Singapore's Maritime and Port Authority at mid-year vetoed sale of SembCorp's shares in Jurong Marine Services to PSA Marine. The Authority stated that Jurong is a provider of domestic towage services and PSA Marine, already a dominant player there, should not have a stake in another towage company. However, sale of SembCorp Logistics' other marine services was approved so that PSA Marine could expand its overseas operations in towage and salvage (italics added).

And finally, in a paper presented at the 1998 International Tug and Salvage conference in Cape Town, energetic and hustling Henk van den Berg, manager of Fairmount Marine, which represents several Chinese towage companies, confidently claimed that 'Chinese towage and salvage companies will be world leaders.' Note that this prophecy does not include harbor tugs but ....

Your bet is as good as ours as to what will happen. Who has the deepest pockets and the hottest fire in the belly? A.P. Møller? Adsteam? Smit? Some Asian firm? If we had to bet in the near-term, our money would go on an European company.


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