Further consolidation in the container shipping market seems to be imminent and is likely to result in the survival of five or six top carriers, according to the Chief Executive Officer of AP Møller Mærsk A/S, Søren Skou.
In an interview with the Financial Times, Skou is cited as saying that “the consolidation trend in the past 24 months that has seen eight of the top 20 container shipping groups be acquired or go bankrupt would continue” in the upcoming ten years.
The market has already seen CSAV being acquired by Hapag-Lloyd, NOL/APL by CMA-CGM and the two major Chinese lines merging. This was followed by the financial collapse of Hanjin Shipping which marked the sector’s biggest casualty in 30 years.
Aside to the tonnage overcapacity in the sector that pushed down freight rates causing financial woes to many carriers, Skou said that the consolidation push has also been driven by “the withdrawal of many governments from the sector” such as in the Middle East, Singapore and South Korea.
Maersk’s container shipping arm, the world’s largest, Maersk Line is in the process of buying German rival Hamburg Süd, a part of the Oetker Group, for EUR 3.7 billion (USD 4 billion) on a cash and debt-free basis.
The bolstering of ranks among container carriers has been prompted by the need for further market equilibrium aimed at restoring sustainable financial recovery for carriers and bridging the gap between tonnage demand and supply.
Once the top-five container shipping companies complete consolidating their market position through mergers and acquisitions, their market share is likely to be around 57% in 2018, up from 45% in 2016, according to Fitch Ratings agency.
As stressed by Fitch earlier this year, merger and acquisition deals are the preferred option to alliances, as “they are the most likely route to restoring the supply-demand balance in container shipping.”
The latest push in this direction saw China’s COSCO Shipping Holdings made a bid to acquire all issued Orient Overseas International Lines (OOIL), the world’s seventh largest container shipping line, for a total of USD 6.3 billion.
World Maritime News Staff