7 Nov

Change in Reasons for Shipping Line Mergers

JAPANS TOP 3 LINES TO MERGE

The announcement late last week that 3 of Japans leading shipping lines, NYK, MOL and ‘K’ Line, are to merge to form the worlds 6th largest carrier came as no real surprise as the move had been rumoured for several months while discussions were being carried out.

It’s worth noting that this follows a trend for mergers that has been in play in the shipping line industry for quite some time now, and this merger will further reduce the total number of global carriers to 13. (There were 20 just 6 years ago).

Other recent mergers have included APL being taken over by CMA-CGM and APL merging with UASC.

 

REASONS FOR MERGING

The main reason for shipping lines to seek mergers up to about ten years ago was to maximise growth potential as manufacturers in the West rushed to switch their production to the Far East.  Fleets of new super container carriers were also ordered to handle the increase in demand

Now it’s more a matter of survival as the lines have had to fight for a share of a shrinking market against the back drop of the new super container carriers coming on line.  The resulting over capacity has made it impossible for the lines to maintain freight rates that would keep them in profit.

 

WHY THIS MATTERS

Ten years ago shipping line mergers may not have been  a major concern for UK importers as this allowed the lines to invest and meet the demand for more capacity, thereby reducing the issues faced of containers being delayed or short shipped.  During a time of growth in the global economy we needed the shipping lines to restructure to meet the demands of importers and exporters.

However the mergers taking place now will mainly serve to give the lines more control over supply in the market.  This will undoubtedly force freight rates up… and this at a time when UK importers are already struggling with issues relating to Brexit, the resulting devalued pound and an economy that remains flat to say the least.

If you have an opinion on this you would like to share please feel to add your comment in the box below.

 

 

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