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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
'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.
Smit
 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.
Wijsmuller
 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.
Adsteam
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 ....
Summary
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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