Hamburg: Composure, reflection, action – these are the traditional Hanseatic virtues that lie at the heart of Auerbach, according to the firm’s good-looking website.
Action is definitely underway at the Hamburg-based firm as it chases its first foreign investors, aiming to double its equity to EUR40m.
Founded by Lucius Bunk (pictured left) and Alexander Tebbe (pictured right) in 2010, Auerbach is focused on the multipurpose (MPP) sector. Both had previously been with Ernst Russ, before coming up with a novel way to be a shipowner.
“When we started to consider founding a shipping company in 2010,” Bunk relates, “we of course often asked ourselves what to learn from the crisis.”
One of the key factors causing and still supporting the ongoing maritime crisis, Bunk points, was the ease to raise both equity and debt to buy all different kinds of ships.
“Fleet growth at the time was not cargo driven. Instead there was a lot of artificially created demand for tonnage which resulted in an unprecedented excess capacity with many of the ships being financed as single ship funds and not as part of a purposely-built and managed merchant fleets,” the German national observes.
Bunk and Tebbe decided to create a different model of equity participation, with an exclusive focus on one niche segment – MPPs.
“Rather than investing into individual ships,” Bunk explains, “our shareholders hold a direct stake in our parent and holding company, i.e. in Auerbach Shipping itself – a company which strives to build up the entire maritime value chain, from technical management to cargo operation, around a modern fleet of 10-15 multipurpose heavylift vessels.”
Once the fleet is fully up and running Auerbach intends to establish direct access to cargo forwarders, in order to become less dependent of third parties and to raise investor returns when the shipping cycle turns.
Auerbach owns three 12,000 dwt MPP tramp ships today, each bought from distressed sellers at less than half of their respective newbuilding prices. Two of these vessels are part of a Beluga inspired 80+ ship series built between 2004 and 2012. The so-called E-/F-Types are 12,750 dwt and have a SWL between 240 tons and 360 tons and are often referred to as the work horse of the MPP tramp industry today.
The total Auerbach fleet operated today consists of five vessels, with currently 10 employees ashore and more than 20 German seafarers onboard. Among the vessels managed is the Enercon-owned one-of-a-kind prototype vessel E-Ship 1. As Germany’s largest manufacturer of wind turbines, Enerconfounder Aloys Wobben decided to put pen to paper and design a cargoship which makes use of the oldest form of seaborne propulsion: the wind. The E-Ship 1 is a 12,000 dwt MPP ship with four so-called Fletter sailing rotors on deck for additional sail propulsion. With ideal wind conditions fuel savings of up to 25% can be reached, Bunk says.
In addition to the five ships in the water Auerbach ordered four new MPPs at Jiangzhou Union Shipard for delivery in 2016/17. The vessels were designed in Germany in close cooperation with two heavyweights in the industry – Briese/BBC and Krey Schiffahrt. With 12,500 dwt and two 250 ton Liebherr cranes the one-hold design will consume up to 30% less fuel oil as compared with the predecessor Beluga design, Bunk claims.
There are no plans to look at other sectors. “On the contrary,” Bunk says, “we believe that the exclusive focus on the multipurpose market allows us to optimally utilise economies of scale, to build up and strengthen a clear brand and to establish ourselves as a market participant in a clearly defined industry.”
Expanding on Auerbach’s operating philosophy, Bunk says, “Vessels are a means to an end. They are utilised for the transport of cargo. We therefore believe that the key to success is to fully understand the demands of the cargo owners and forwarders. Only if we do so we can provide the optimal service to our heavylift customers.”
On the freight rate outlook for 2015, Bunk says the first couple of months of the year have given “mixed signals”. On the plus side, Bunk sees many large scale projects underway such as offshore windparks off the US coast or huge infrastructure projects in Africa, which will fully materialize over the next two to three years.
“Our expectation for this year is that despite the fact that there will be plenty of cargo going round the freight rates will continue to move sideways with some hope for the situation to improve in Q4,” Bunk says.
To date, all Auerbach’s investors have been German nationals, but now the company is in talks with its first foreign investors – including Chinese (Bunk’s peripatetic university stints included Edinburgh, Hong Kong and Shanghai).
“With ever increasing appetite of Chinese nationals for direct investments into German medium sized enterprises during recent years we believe that the Chinese market is the one to closely monitor in the coming years,” Bunk concludes.