Big Changes Ahead

Posted on Posted in Industry News

Big Changes Ahead!

Every industry has its highs and lows. Container shipping is no exclusion. Now at such a tense moment compare to other sectors like airlines or/and railroads.

the fact that M&A may change will be news to big carriers like NOL and both Maersk Line and CMA CGM; Cosco and China Shipping Container Lines; and Hanjin Shipping and Hyundai Merchant Marine.

The amount of space left makes it impossible to determine freight rates from the next three years, when no one knows exactly what going to happen.

“What we are seeing now is not all that surprising… I have been saying that by 2020 there will be only eight big carriers, and this is gradually what is beginning to unfold. It will take a long time.” said Lars Jensen, CEO of SeaIntel Maritime Analysis in Copenhagen.

Photo Source: www.worldmaritimenews.com

In the past year there were many acquisitions the impact transportation sectors for instance: FedEX acquired GENCO and is buying TNT Express, UPS bought Coyote Logistics, XPO Logistics acquired Norbert Dentressangle and Con-way, Kintetsu World Express bought APL Logistics, and DSV is buying UTi Worldwide.

Peter Shaerf, managing director of AMA Capital Partners, a New York investment bank that specializes in maritime deals said, “I just don’t see it happening between two private companies. I think there will be sporadic mergers, like that between Hapag-Lloyd and CSAV, but I don’t see it as a pervasive trend.”

Not just for M&A  but for any steamship line there will be a lot of regulation to guard against monopoly. Any changes in the industry will affect and make one trade lane control too much of the market resulting in monopoly.

European and Chinese regulators’ alarm bells go off when carrier combinations result in their market share reaching or exceeding 30 percent of a single trade lane’s volumes.

Although the U.S. Federal Maritime Commission doesn’t hold a rule for this situation, the agency can block any changes to vessel-sharing agreements, or shipping alliances.

If the changes were made, the new alliance structure would be: 2M (Maersk, Mediterranean Shipping Co.); G6 (OOCL, Hapag-Lloyd, NYK Line, Hyundai, MOL, Hamburg Sud); KYHE (“K” Line, Yang Ming, Evergreen, Hanjin); and O3 (CMA CGM-APL, Cosco-China Shipping and United Arab Shipping Co., with five carriers becoming three).

NOL is attracteted to acquire CMA CGM for many aspects including the fact they have nine terminal and two of them are in the U.S.

Kim Young-suk, South Korea’s new minister of oceans and fisheries, made a clear statemente in a Nov. 18 press conference when he mention both carriers need ultra-large container ships if they are to be competitive. He said he’d hold discussions with related agencies to enable banks to provide financing that would allow the financially strapped carriers to acquire the mega-ships. “I have never believed the two companies should merge,” Kim said.

“With just one shipping line, we could become less competitive with export rivals in the region, such as Japan,” a senior Korean industry executive added. “Our shippers are concerned about the potential reduction in competition and the effect this could have on rates.”

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