Shipping’s problems rather than successes have been headline news now for several years and are also given top billing at seminars and networking events. For the last six months most of the talk has been all about mergers and acquisitions. Merge to survive seems to be the mantra of the day in every sector of the industry. From shipbuilding to ship operation and management and even P&I it seems that companies and organisations are finding it difficult to stand on their own two feet and hold their own in an increasingly competitive world. What hasn’t helped was a period of unrestrained growth and a failure to understand that all good things have to come to an end. Mergers between Chinese state-owned shipbuilders or shipping companies may be huge in scale but are not really mergers as is understood my free market organisations. Japanese shipbuilders on the other hand have been reacting to lost market share for years by combining their efforts. Europe by contrast has had very little in the way of recent shipbuilding M&As apart from the absorption of various remnants of the STX empire into Fincantieri or Meyer Werft. South Korean builders might be troubled by a lack of orders but it seems that the government there prefers them to come up with self-rescue plans rather than be pushed into forced mergers by creditor banks and institutions. Although the government in Korea is trying to manage the crisis in shipbuilding and ship operation, the fact that just three newbuilding orders were won by Korean builders in the first quarter of 2016 does not bode well for the future. Mergers or acquisitions are aimed at reducing competition and cutting costs. It can work in shipbuilding of course because it allows orders to be spread over fewer players and for facilities to be closed down. But it is in ship operation that the biggest problem exists. Mergers such as between CMA CGM and NOL, the two Chinese operators Cosco and China Shipping or that proposed between Hapag-Lloyd and United Arab Shipping Company (UASC) are a very different kettle of fish. Although they are favoured by financial institutions - Fitch Ratings said in late April that mergers and acquisitions, rather than the historically more popular alliances, are inevitable to address chronic overcapacity and drive further cost savings in container shipping – there is one fact that those not involved in the shipping industry almost always fail to grasp. That is that unlike closed down shipyards, a ship that is not being operated by a liner service is, unless it is scrapped, available to anyone with the confidence to charter it and operate it in possible competition with the line that has returned the ship to its head owner when a charter has ended. There may be some scrapping of older vessels but almost certainly nowhere near the amount needed to bring balance back into the container trade. What should not be forgotten is that since the shakedown in the German KG system a few years ago, there are far fewer owners today than was once the case but the number of ships they operate is the same. The major line operators are not dependent on the non-operating owners because the largest ships in the market are almost without exception in direct ownership of the big players who also have plenty of every other size of ship as well but the head owners need to earn from their ships to pay off loans and to make a living for themselves just as the line operators do. If the majors do not want the ships they will have to find someone who does. Mergers between liner operators will inevitably mean that there will be shedding of staff at every level. Undoubtedly there will be some among them with the entrepreneurial spirit to take on the surplus vessels and make a success of running them. It may not be a piece of cake but as the reducing number of container alliances is shrinking the element of competition that shippers and receivers already complain of as being missing, will be something that newcomers can bring back into the picture. Increased competition is the last thing that the big players will have been hoping for as the consequence of their mergers. There are just four alliances now operating on the Far East to Europe routes and mergers between lines mean that the alliances themselves may soon become threatened. M2 already comprises just two operators. Even this limited number is proving unable to effectively manage the services profitably. That must call into question the ability of the management and executives of the major lines to bring the rewards that shareholders demand. Having caused the overcapacity with orders for vessels that are likely never to achieve the economies of scale predicted for them, the big operators are now blaming their problems on a fragmented industry, that despite the number of operators today being considerably less than it was when the sector was providing good returns. If previous consolidation such as when Maersk bought out P&O Nedlloyd or when CP Ships became part of Hapag Lloyd did not materially change the sector, then more of the same is hardly likely to change fortunes. Considering the drop in operator numbers, the argument that the container shipping sector is too fragmented is not one that will wash much with users. The EU has approved the merger between CMA CGM and NOL but with conditions and any whiff of anti-competitive actions will have repercussions as shippers’ bodies in Europe and Asia have already expressed concerns with the current situation. Mergers are also being spoken of in the offshore sector but here there will not be the same hostility from users. There are far less customers than there are in the liner sector where shippers number in thousands on each vessel. There is however more reluctance to merge not least because a lot of the operators in offshore are family companies that are fiercely independent. They have to satisfy their bankers and financiers of course but have less shareholder hostility to contend with. If there is one area where mergers and acquisition may soon be essential, it is in the ballast water treatment system manufacturing sector. Once the IMO convention is signed there will be a five to ten year boom in the retrofit market after which things will settle down to just a few thousand installations per year. That will not be enough to feed all of the makers now active so some will have to disappear. Considering the situation with regard to South Korean shipbuilders’ precarious position and the fact that several of the systems in the market are linked to the shipbuilders concerned, there is a good chance that some of these may be among the first casualties. A similar situation applies in China. In the event that consolidations do take off, there will be a big cost to the industry that may prove a very expensive price to pay. Experience at all levels but particularly at the important higher operational tiers is notable by its absence. Staff cuts as a result of mergers may mean that some of this experience becomes lost to the industry for good. Many of those that will be made redundant or take early retirement are needed to train future generations. Lack of experience is often identified as a root cause in accidents and incidents and one that will not be addressed by removing the means by which that lack could be rectified.