Mergers & Acquisitions in Container Shipping to Cause Operational Headaches

The latest merger and acquisition activities in the container shipping sector are set to cause some operational headaches to container shipping alliances as they lose their member lines, UK-based shipping consultancy Drewry believes.

French liner company CMA CGM, which is in the process of acquiring Singapore’s APL, plans to move its new addition into the Ocean Three alliance from the G6 Alliance of which APL is a member.

As World Maritime News reported, G6 said last week that the acquisition is not expected yet to cause any impact on its operations, pending the acquisition’s approval from regulatory bodies, expected by mid-2016.

Under the terms of the G6 agreement CMA CGM will need to give a minimum of six months’ notice after the change of ownerships, which based on the initial timeline of the deal will mean the G6 can stay intact until the end of 2016 at least, unless of course the relevant parties can reach an earlier settlement, Drewry said.

On the other hand, Chinese shipping giants Cosco and China Shipping have been granted merger approval by authorities in Beijing, creating the world’s fourth biggest carrier based on the operated fleet.

However, it is not yet known if Cosco/CSCL will reside in the Ocean Three (current home of CSCL) or the CKYHE Alliance (home to Cosco).

“The coming together of CMA CGM with APL and of Cosco with CSCL will allow these two groups to play catch up with Maersk and MSC at the top of the size rankings and will further concentrate control of the fleet among the leading few carriers:  the new Top 5 carriers will control around 55% of the active fleet and orderbook as they currently stand,” Drewry said.

In conclusion, Drewry anticipates that the ongoing consolidation efforts will not do anything to improve industry profitability in the medium term as it merely shuffles the excess number of ships into fewer hands.

“Further consolidation is a possibility as other lines decide they cannot keep up with the Jones’ but the challenging outlook will subdue valuations, making them less appealing to potential sellers,” the consultancy added.