Since the Great Recession of 2008, consolidation among vessel operators has been a trickle. But in 2016, the floodgates may open wide.
Franch carrier CMA CGM will acquire Singapore's NOL. China is merging state-owned China Ocean Shipping Group Co. and China Shipping Container Lines. And with the Korean government reportedly pushing Hanjin and Hyundai to weigh a merger, there is growing speculation that other ocean carriers will follow suit, unleashing a cascade of changes that will include a dramatic shuffling of the four major vessel alliances and the calls at this nation’s ports.
For example, Cosco is a member of the CKYHE Alliance, which also includes “K” Line, Yang Ming, Hanjin and Evergreen. Meanwhile, China Shipping is a member of the Ocean Three Alliance with CMA CGM and United Arab Shipping Co. Cosco is a partner in a Port of Long Beach container terminal, while China Shipping operates a facility at the neighboring Port of Los Angeles.
There is no question that ocean carriers need to quickly deal with worldwide overcapacity and weak freight rates — with even bigger container ships still to come. Of course, that’s why the world’s top 16 ocean carriers created the four major alliances, to fill slots and stabilize rates. But now there are likely to be fewer carriers and perhaps fewer alliances.
What will that mean for the ports? How would the merged carriers operate their Long Beach and Los Angeles terminals, and how would they divide their vessel calls?
Similar questions will be asked throughout the supply chain, with significant consequences for the alliances, railroads, trucking, and equipment providers.
An already competitive industry is likely to see even greater competition.
Jon Slangerup, CEO, Port of Long Beach