Entering a new era

Malcolm Latarche
Malcolm Latarche

13 January 2017


More mergers – or at least one – in the troubled container sector are being talked with OOCL and CMA CGM being the latest operators said to be considering some form of merger. Whether it comes about remains to be seen but if it does it will likely not be welcomed by shippers and receivers who have seen the number of options for their business reduce throughout 2016. Both operate on the main Asia to Europe trades which has already seen NOL and Hanjin disappear. Further reduction in operator numbers may be seen as a positive by those already established and there does not as yet seem to be a reversal of the trend. However, news that Korean bulk operator SM is now in the process of picking up container ships at bankruptcy sales emerged this week and it is reported that it will establish a new container operation in March with an initial 12 ships. The ships in question are 6,500 and 4,00teu types and will probably operate either in Asia or on the Asia-US routes. It is always be the case that unless ships are taken out of service completely they will at some point re-enter service under a new owner. SM Line may not yet – and perhaps even never – pose a threat to operators on the European trades but as they gain experience of liner operations, they may be tempted to expand into other areas. Protectionism and a reverse of globalisation may well lead to a reduction of volume on the route but that will only put it back to levels from the late 1990s or 2000s. The fact that the Europe Asia trade was once profitable and able to sustain multiple operators means that it could again in the future. The majors are banking on mega ships and economies of scale but continual consolidation could make that a short-sighted strategy. If 2017 is the point at which changes are about to be reversed, the time will soon come when smaller operators and smaller ships become fashionable once again.