Ron Widdows, Uncensored

I had the privilege at the 14th Annual TPM Conference in Long Beach last month to spend an hour on stage in a live Q&A with Ron Widdows, the former NOL-APL chief who now heads Hamburg-based shipowner Rickmers Group. Few in the industry combine the breadth of experience and willingness to share their opinions in an open forum. Widdows is one of them. While at NOL, he engaged in a multiyear public crusade for greater U.S. investment in transportation infrastructure, opening the eyes of federal policymakers to the need for viable seaports. It’s one reason he was inducted into the International Maritime Hall of Fame in New York last year.

On stage at TPM, Widdows was his typical, outspoken and articulate self, holding forth on topics such as the state of the container lines that are top of mind for many in the broader industry this year. I asked him in particular about what he sees transpiring with the carriers this year and further into the future, given rapidly escalating ship sizes, a poor record of profitability and the formation of mega-alliances such as the recently FMC-approved P3 Network. He observed that while outright consolidation has been a rarity — the impending merger of Hapag-Lloyd and CSAV would be the first instance of carrier consolidation since CMA CGM acquired US Lines in 2008 — the big carriers getting bigger is one factor specifically that has altered the dynamic in fundamental ways.

“With the TSA (Transpacific Stabilization Agreement, the trans-Pacific eastbound discussion agreement, a group he chaired from 2008 to 2010), or the forbearers of TSA, you had this feeling like you had some control over the rates. Everybody had some control. You had to be collectively stupid to drive (rates) off a cliff,” he said.

Now as the gap between the biggest carriers and everyone else has widened, the dynamic is different. “The development of these really exceptionally large players, that now begins to play in a very different way. Now, it takes one, maybe two, to drive the whole program over the cliff, or take it to a better place,” Widdows said. “Unfortunately, it hasn’t gone to a better place as a result of this yet.”

And that plays into one of the big changes that has occurred in the industry: the virtual abandonment of price as a focus of the carriers, Widdows said. “However you may have thought you had some ability to deal with the price side of the business, now it’s gone,” he said. “It’s totally driven by the market, and most of the carriers are just dragged around by the decisions that are made by a few.”

The result is that carriers are now focused 100 percent on cost, driving decisions on everything from chassis to alliances to the ordering of mega-container ships. “Is it about service today? No, of course not. It’s not about service. It’s about finding a way to lower your cost,” Widdows said. That means carriers are “going to continue to order ships because they have to. They have to lower their costs, and the only way you can do that materially is through the assets.

“This is a lot of investment that I can tell you many of the carriers didn’t think they were going to have to undertake, that now they have to undertake. They’re driven down the road of doing that,” he added.

How the story plays out in the coming years is an open question, but if you’re waiting for a spate of consolidation despite carriers’ perpetually poor financial performance, Widdows says you could be waiting a while. “It’s very difficult to see an enormous amount of consolidation, or a consolidation to the point to achieve what? If it’s about achieving an ability to control pricing, it’s pretty difficult to see the industry consolidate to the point where that takes place,” he said.

Contact Peter Tirschwell at ptirschwell@joc.com and follow him on Twitter: @petertirschwell.

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