1.3 million. That’s the new threshold in teu where a carrier can feel just about safe, according to Splash contributor and SeaIntel Consulting founder, Lars Jensen. As a result of the rapid consolidation in the liner sector seen in 2016, attention is now turning to those companies who have yet to crack into the millionaires club teu-wise, speculation that is prompting plenty of denials.
The week started off with the dramatic news that Japanese rivals NYK, MOL and K Line would lump all their container shipping assets into a brand new joint venture company next April, putting the trio on a par with Cosco Shipping (itself a merger of Cosco and China Shipping’s box assets) and Hapag-Lloyd (post mergers with CSAV and UASC).
Jensen, a widely respected container guru, then suggested the news from Japan put long-term pressure on the remaining mid-sized global carriers, such as Yang Ming, OOCL and Hyundai Merchant Marine (HMM).
Cue a welter of denials.
HMM, for its part, let it be known it was setting out to order up to twenty 13,000 teu ships, as well as taking on much of the rump of compatriot Hanjin Shipping in a bid to catapult itself into the millionaires club and fluff up its credentials to join the 2M vessel sharing alliance between Maersk and MSC.
Over at the Cosco World Shipping Summit this week senior officials at Yang Ming and Evergreen both denied market speculation of a merger between the two groups.
Chang Cheng-Yung, president of Evergreen Marine, told reporters yesterday that the two groups haven’t had any merger talks and the merger definitely will not happen.
Bronson Hsieh, president of Yang Ming and up until a few months ago the vice chair at Evergreen, also denied the merger talk pointing out that the government’s stake in Yang Ming makes any merger discussion tricky.
In Hong Kong, meanwhile, despite repeated rumours, OOCL spokespeople continue to assert the Tung family controlled line is not for sale.
Nevertheless, the incredible spate of consolidation seen in the sector is unlikely to be over – we’re anticipating some more well known brand names to be swallowed up. What of Hamburg Sud and Zim, for instance?
One of the architects of the consolidation, Soren Skou at Maersk, told the Wall Street Journal earlier this week that 20 years ago the top three carriers in the world had a 17% combined share; by next year the top three lines will control 43% of the market, he said, adding ominously: “… and it’s not going to stop there”. Skou and Maersk have well telegraphed a step change in expansion policy – newbuilds are out, liner acquisitions are in.
Skou had a busy week in front of the media unveiling the Danish group’s latest quarterlies. He also told Bloomberg: “If you look at vessel prices and share prices, it’s a fact that the container industry is priced at historical lows — perhaps an all-time low — which could mean that now is a good time to buy. But if you buy something that doesn’t generate any earnings, it could turn out to be a very expensive takeover.”
To finish I’ll return to an earlier thesis posited by SeaIntel’s Jensen. A long time back he suggested there would be just six to eight global carriers by the mid-2020s – he was saying this as far back as five years ago when there were 20 carriers, a figure that has declined dramatically to 13 this year, likely to be an unlucky number for someone soon.