Liner Shipping

All the Ships at Sea

Until his death in 1972 Walter Winchell entertained America with his views on everything from crime to maritime. His comments on the U.S. Merchant Marines even landed him in court. He was fond of opening his broadcast with the sound of a telegraph key to emote a sense of urgency. His favorite catch phrase was “Good evening, Mr. and Mrs. America from border to border and coast to coast and all the ships at sea”. As we close 2016 I wonder what Winchell would say about the state of our ocean container industry if he were alive today. Has the Roller Coaster Stopped? This year has certainly been one heck of a ride for the container industry. American President Lines, the essence of U.S. Flag shipping, was bought by CMA CGM in April for $825 million. APL was originally purchased by NOL back in 1997. Singaporean owned Neptune Orient Lines (NOL) allowed APL to maintain its flag status and autonomy as NOL had no trade lanes in or out of the United States. Thus, there was no blending of services or interchange of equipment. In July as part of the CMA-CGM conglomerate, NOL ceased to exist while APL survived intact. For the moment! Although if CMA’s purchase of U.S. Lines back in 2007 is any indication, APL’s chance for continued autonomy seems good. USL continues to operate under the general ANL banner as a subsidiary of CMA. The sad fact remains that NOL/APL cease to operate as independent entities. We shouldn’t overlook the fact that APL owns and operates Eagle Marine Services which manages the Global Gateway South facility in Los Angeles. This also becomes one of the assets acquired by the CMA organization. We are barely three months out of the mess caused by Hanjin’s sudden bankruptcy. Boxes coming off ships scheduled to arrive in September were still being discharged last month, and container yards continue to struggle with mounting empties which take up space and reduce through-put. This month what remains of Hanjin Shipping signed an agreement with MSC to purchase its share of Total Terminals International. TTI has two facilities: one in Seattle and its larger cousin in Southern California. Pier T Long Beach was jointly owned by Med Shipping and Hanjin. The facility sits on 385 acres of land and handles about a third of the port’s containers. Hyundai Merchant Marine is said to be part of the bid and would jointly operate the facility with MSC. TTI hopes to finalize the deal by January of 2017. Hanjin’s demise has left another hole in the container industry. At the beginning of December Maersk announced its intention to buy Hamburg Sud from the Oetker Group. The merger to be completed in late 2017 would increase capacity by 18.6%. Founded in 1871 by 11 trading houses, Hamburg Sud began service to Brazil with three small cargo vessels. Today the line represents 606,146 TEUs across 117 ships. Alphaliner has ranked it number 7 in their list of top 10 container carriers. Maersk, acting on pressure to maintain its position as the number one container carrier, watched its competitors gobble up precious assets. The line made an initial offer to buy APL but couldn’t close in time to shut out CMA CGM. Again in July the carrier missed the boat (pun intended) when it lost out to Hapag Lloyd on a bid for United Arab Shipping. The December deal was the next logical move to strengthen container capacity and increase its fleet. Maersk also gains additional visibility in Oceania and Latin America which remain somewhat niche markets. Columbus Line, a subsidiary of HBS, adequately counters CMA’s ANL offerings to and from Australia and New Zealand keeping competition in perspective. In Latin America, Hamburg’s sister company Alianca helps Maersk balance Hapag Lloyd’s service in the same trade lanes through CSAV. In the end, another independent carrier folds into the emerging world of “Carrier Conglomeration.” Anti-trust, who said anything about Anti-trust I don’t know, do you see a pattern emerging here? The loss of APL, Hanjin, Hamburg Sud, and let’s not forget UASC has shrunk the base of “stand alone” carriers by four lines. In addition, two terminal operators have been incorporated into large multi-functional conglomerates. More consolidation of services, less independent competition. The industry seems to be imploding upon itself. In a decade of non-compensatory rates, carriers scrambled to lower costs. It’s no wonder the bottom is beginning to drop out. Shippers have gained from carrier price wars but unfortunately they may have reaped the whirlwind. In an era where fewer carriers own more lines and trade routes, there’s no need for them to seek FMC Anti-Trust Immunity. Will you still have competition? Yes, but less of it. With fewer independent carriers to choose from, those companies left will be less inclined to take your freight if they can’t make money on it. There’ll be no rate collusion, but neither will there be as much in-fighting. Will 2017 see a further loss of independent carriers and terminals as the backbone of competitive trade is further strained? Who’s next on the container industry hit list?
Matt Guasco
Matt Guasco


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