The new year is widely tipped to be the year of consolidation.
The stage appears to be set in the liner sector, with the sale of NOL/APL in the offing; the proposed merger of Cosco and China Shipping Container Line; the rumored merger possibility of the two Korean carriers Hanjin and Hyundai; and the prospect of spinning off the liner fleets of Japan's triumvirate of NYK Line, “K” Line and MOL to create the fourth-largest container carrier. Maersk Line, after possibly losing out to CMA CGM in the NOL/APL stakes, has indicated that this would not deter its appetite for acquisitions. There could be a few candidates in the lower half of the Top 20 carriers willing to sell after years of accumulating losses.
Not to be outdone, Canadian Pacific Railway sprang a surprise with an offer to purchase Norfolk Southern, an offer that was spurned by the latter. The conviction that "size does matter" has not been lost on the trucking sector, where the Top 50 carriers continue to gobble up smaller truckers.
Shippers have already voiced concerns that ultra-large container ships and mega-alliances are limiting their choice of service, and that service quality has suffered.
The new wave of consolidation is not in the interest of shippers. It is the untenable return on investment that shippers partly fueled that has led to this development. Also contributing to this scenario are some of the regulatory agencies, including the Federal Maritime Commission, that have railed against carriers when legitimate charges to recoup congestion-related expenses and demurrage and detention were announced.
It is my view that there will be a reversal of fortunes by the turn of the decade, with carriers in the driving seat. Consolidation would lead to a reduction in surplus capacity by diminishing the quest to grow, level off competition and place carriers in a position to recoup the ROI reversals suffered over the past five years and very likely over the next few years.