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"In a decade, there will be half a dozen shipping companies dominating the market"
Maersk Line CEO Soren Skou's prediction that in a decade half a dozen shipping lines will dominate the market is not far from the truth. The consolidation of the shipping industry in recent months has been pronounced, especially thanks to Cosco's recent acquisition of OOCL in a US $ 6.3 billion transaction.
This business between the Chinese and Koreans is not the only one. Maersk Line is about to complete the acquisition of Germany's Hamburg Süd, pending regulatory approval in Brazil. CMA is waiting to finalize the purchase of the Brazilian Mercosul Line, currently owned by Maersk. If you also consider the integration of the Japanese Ocean Network Express (ONE), there will be only 12 container shipping companies with a market share of close to 1%.
The edges of consolidation
The implication is that not only shipping companies such as Hyundai, Yang Ming and ZIM will not be able to survive (PIL and Wan Hai are still geared towards niche routes), but someone else will have to leave the industry. Hapag-Lloyd, Ocean Network Express and Evergreen are currently in positions 5, 6 and 7 respectively. But, will it really take 10 years to consolidate the new 5-6 shipping companies configuration?
The formation of alliances is another form of consolidation. It does not get the full benefits of an acquisition, but it does allow significant economies of scale advantages. The alliance of The Ocean Alliance and THE Alliance have just completed the largest re-deployment of container ships, while 2M is making adjustments to accommodate Hyundai and Hamburg Süd.
Most of the routes relevant to the Americas remain outside the effect of these alliances, but this could be changing towards 2018-19, along with a revitalization of Latin America's service structures. The acquisition of Hamburg Süd will catalyze this announced change by breaking with the established order of certain regional agreements. The first affected would be the Asia-Mexico-WCSA route where CMA CGM, Cosco and Evergreen will integrate their services.
The waves of change
There are still changes pending for Latin American shipping. However in their current conditions many port terminals are struggling, and are thinking less about what will come next. The mega-container ships have increased operational and capital costs, but they do not bring more load volume. Fewer services have increased the values and conditions of their contracts, which has forced a drop in tariffs that in many cases are unnecessary.
Those favorable forecasts for the future have led to waves of investment in port infrastructure. These have had the opposite effect by offering an overcapacity and thus further driving down rates.
Publication date: 8/30/2017
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