More Container Shipping Consolidation Expected as Smaller Carriers Try to Keep Up

The Loadstar
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June 19, 2017

File photo: REUTERS/Fabian Bimmer

By Mike Wackett (The Loadstar) – There is a “high likelihood” of a new wave of M&A activity involving medium-size ocean carriers, as the gap widens between them and the largest container lines, according to shipping consultant Drewry.

The merger of the container businesses of K Line, MOL and NYK will propel the new Ocean Network Express (ONE) into fifth place in the global rankings, with around 1.7m teu of capacity (after taking into account their orderbooks), it said.

Hapag-Lloyd is sixth, with approximately 1.6m teu, and with its orderbook included, Drewry said, Evergreen becomes the seventh-ranked carrier with some 1.3m teu.

Then there is a substantial distance to the eighth-biggest carrier, OOCL, with approximately 769,000 teu of capacity, and ninth-placed Yang Ming with a fleet of around 708,000 teu.

In terms of market share, Maersk Line continues to dominate with 18.4%, based on its fleet, including orderbook, of roughly 4.2m teu, followed by MSC with 13.5%, on around 3.1m teu, while CMA CGM’s capacity of approximately 2.4m teu gives it a 10.4% share.

Drewry notes that the top three container lines, again with orderbooks included, now enjoy a massive 42% dominance of the global container market, which compares with the 26% share held by the top three carriers in 2005.

CMA CGM’s acquisition of APL, the merger of Cosco and CSCL, Hapag-Lloyd’s merger with UASC and the forthcoming takeover of Hamburg Sud by Maersk has resulted in a widening of the chasm between the big players and their mid-sized peers.

“Inevitably, as the gap between the leading seven carriers and everyone else gets wider, speculation will mount about whether the smaller players can keep up and remain cost-competitive,” said Drewry.

It noted that OOCL had recently been linked to a takeover by Cosco, and that the “financially troubled” Yang Ming had been obliged to consistently provide updates on its financial status and bat away suggestions of a merger with its bigger Taiwanese compatriot, Evergreen, all of which is unsettling for any business.

Indeed, according to sources, The Loadstar has heard that Yang Ming continues to be regarded with caution by some shippers which undertook stricter internal credit reviews in the aftermath of the collapse of Hanjin Shipping last year.

The general consensus of opinion is that carriers will enjoy a much improved second quarter financial performance on the back of significantly higher contract and spot container freight rates. Arguably, this could ease the pressure on Yang Ming in particular and temporarily quell further merger talk.

Drewry agreed that one consequence of the rush of M&A activity over the past two years was that shippers now had fewer and fewer options when booking container space.

This was the “unfortunate price” to be paid for years of sub-economic rates that had forced carriers to “seek safety in numbers”, it said.

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