This column contains speculation. I hope that it is speculation based on the principle that, to a certain extent, the past may provide, if not a guide, then at least a greasy handrail on the ladder to the future. Hardhat and safety boots are recommended.
I am going to peer into the past to see what may happen to container shipping.
The struggle for mastery of the Asia-Europe tradelane is in its final stage. Chinese dominance of the sea route to Europe is implicit in the One Belt One Road strategy, so we should not find the aspirations of Cosco Shipping to be in any way a surprise.
I think that Maersk’s alliance with MSC is the least surprising development. Culturally, these two huge empires resemble each other more closely than an outsider might imagine. Each is very much the creation of a an outstandingly able and very disciplined individual, and both run with very lean management teams. Both put a premium on innovative flair in operating to schedules. I expect this to be quite a stable partnership. The real decision for these two is return on investment versus market share and I expect that they will both be seeing that question in the same way. The key strengths of this group are their depths of management expertise and their ability to act and react very quickly.
CMA CGM has moved into the Chinese camp. China has long favoured Winston Churchill’s approach to Europe – attack it through the soft underbelly – and CMA CGM fits nicely into this pattern. This group’s strength is the backing – ultimately – of the Chinese state’s committment to One Belt One Road.
History is repeating itself in Japan, where the three major companies have chosen to hive off their container operations into ONE single unit. This has been seen by most observers as a long overdue move, and there has been a certain amount of merriment over the celebrated inability of shipping sararimen to work well together.
However, there is another aspect of this – those with long memories will recall the now extinct British liner shipping companies responding to the threat – and it was a rather similar existential threat – posed by Malcolm McLean’s original development of the box, and the huge investment needed – by putting their container ambitions into two baskets – Associated Container Transport (ACT) was formed by Ellermans, Blue Star, Harrisons, Ben Line and Port Line whilst Overseas Containers Limited (OCL) was the child of P&O, Furness Withy, Blue Funnel and British and Commonwealth, each with a quarter share.
The two groupings were each doomed from the start, simply because their parents continued to exist. Requests from the new, part owned, subsidiaries for fresh investments were often spiked in the board meetings of the parents simply because the directors of the parents were not the directors of the subsidiary. Consequently both OCL and ACT were starved of capital and to some extent were starved of the big management vision that is needed.
I foresee that the same fate awaits ONE. Too little, and far too late. What goes for Japan may go also for Hyundai Merchant Marine (HMM) in South Korea and for the two companies in Taiwan.
Hapag-Lloyd and UASC – the Odd Couple – are perhaps the people with the most interesting management challenges for the near future.
What of the still very large companies, owning and controlling just a few dozen ships, that one is tempted to label the small fry? Pacific International Lines (PIL) has sat for a very long time in its own niche and it is safe until someone else covets that niche – which may happen quite soon, as PIL’s stamping ground is inside the area marked out by One Belt One Road. As is the stamping ground of Wan Hai Lines. We have just seen that there is a price at which even the owners of proud family businesses are happy to say, “Enough of containers!”
Those further down the league table of size by teu and who are dependent on the major tradelanes may well have an independent future – for a while – as they tack down the road of least resistance and become no longer vessel owning common carriers, using the know-how of their loyal staff in that capacity.
Above and beyond all this, and affecting everyone, is the ending of the era of rapid growth in the carriage of goods by sea. We will be looking at a mature market, globally, like civil aero engines, in which the stable number of players, over the long term, is three.