For the first time in a number of years we’re hearing serious talk about major container line mergers.
It makes sense given the environment, in which Asia-Europe rates continue to plunge with no sign of carriers willing to pull capacity to stem or halt the decline the way they’re doing in the trans-Pacific.
As my colleague Joe Bonney reported from the Marine Money conference in New York this week, the financial community is seeing the signs.
Peter Stokes, senior analyst and head of shipping at investment bank Lazard, said: “I believe that we will finally see a number of non-cash defensive mergers as companies struggle to remain competitive on the major east-west routes or seek to strengthen their position in north-south and intra-regional trades.”
Lloyd’s List quoted an MOL executive this week saying a merger of the three Japanese lines could be a possibility. It seems like things could be headed in this direction.
The Economist in an article on container shipping this week said, “Given the stormy waters that may well be ahead, it seems likely that (container lines) will seek economies of scale not only from bigger ships but also from mergers. The industry is too crowded, many analysts believe.”
Maersk, the world’s largest carrier, which recently introduced daily sailings on the Asia-Europe route under the “Daily Maersk” banner, is suggesting it has no plans to pull back capacity. That will make other lines less willing to take the first step given the possibility that others don’t follow and they will lose market share as a result.
But with losses piling up- 2011 is shaping up as another multi-billion dollar loss year- at some point the weaker lines may be forced into each other’s arms. This will be chaotic for shippers; past container line mergers have proven to be messy affairs. And the result will be less competition and possibly more stable, although higher, rates.