The steamship industry is undergoing a dramatic transformation with mergers and acquisitions, with even more expected.
The situation is already having an impact on ports around the world, particularly those with fewer calls and others with congestion and logistics problems.
Marco Vermet, sales manager, fruit, for Kloosterboer, says mergers and acquisitions are having a negative impact on his business. “We cannot retrieve containers in time from container terminals to transfer them – preferably by barge, which is green, cheap and efficient – to our Rotterdam warehouse or the other way around,” he says.
Kloosterboer recently opened the Kloosterboer Cool Port in Rotterdam and operates other logistic facilities and services related to cold storage, stevedoring, forwarding and customs of chilled and frozen foods around the world. “Cool Port Rotterdam functions like a hub from which products are distributed,” explains Vermet.
But M&A activity does create some efficiencies and cost saving for carriers. Steamship executives reveal that M&As give carriers strong positions in certain trade lanes and marries vessels and services. Rolf Habben Jansen, CEO of Hapag-Lloyd, for one, reported that the line’s recent merger with United Arab Shipping not only gives the carrier a very strong market position in Latin America and the Atlantic, but also the Middle East, where it expects to become one of the leading carriers.
Peter Friedmann, executive director of the Agriculture Transportation Coalition (AgTC), however, does not see M&As benefiting the exporter. “Consolidation of services results in fewer sailings and fewer direct port calls,” he says. One example: direct service is no longer available between New York and Japan. Instead, cargo goes to transhipment points, like Dubai, where it sits until being consolidated onto a ship to Japan.
“The issue is compounded if a shipment is chilled, as opposed to frozen, and needs to be delivered in time so the perishable can arrive the supermarket as promised and remain fresh as planned,” he says.
Meanwhile, steamship lines are also reorganizing into global alliances where they share space on each other’s vessels – another cost-saving measure for the carriers.
In early 2016, 16 carriers participated in four global alliances. By April 2017, 12 carriers had become members of three global alliances, which today serve over 70% of the global ocean container trade.
The US Department of Agriculture Agricultural Marketing Services (AMS) has warned that the changes in global carrier alliances could bring disruption to many agricultural exporter supply chains. “Reduced capacity, fewer vessel sailings and rate volatility are of key concern to the agricultural export community as the carriers attempt to ‘right the ship’ of overcapacity in the marketplace,” the USDA says.
More so, most of these lines are, or will soon, deploying megavessels with a capacity of 15,000-20,000 TEUs. With alliances also come new customers with varying destination requirements that will result in some ships likely moving off routes between Asia and Europe to trans-Pacific routes. Panelists at AgTC’s annual meeting voiced concern that new alliances add confusion since an exporter that books a container with one carrier may find that the shipments sailed on another carrier within the same alliance.
Seaports are especially feeling the pressure from mergers and the upsizing of ocean vessels such as the CMA CGM Benjamin Franklin, a ship with a capacity of 18,000 TEUs, which recently called on US East Coast ports for the first time.
But a crane’s ability to lift on and off a ship is not the primary determinant of whether a terminal can handle these large ships, Friedmann points out. Terminals need considerable land, stations and gates at their entrance lanes, plus a lot of rail track. “Not one terminal was designed with large ships in mind,” Friedmann says. “The US doesn’t have any terminals designed to handle ships of 12,000, 14,000, 18,000 and 20,000 TEUs.” This is despite the fact US seaports are reconfiguring terminals and transportation networks in an effort to attract and accommodate megaship and alliance traffic.
California’s Ports of Los Angeles and Long Beach are working on the effort, although their terminals were originally designed to handle ships of about 4,000 to 5,000 TEUs.
Currently, the Port of Long Beach is undergoing a US$4 billion modernization programme, the largest of any seaport in the United States, to address issues resulting from the deployment of megavessels. The program includes US$1 billion for a rail improvement program that will help prepare for cold chain expansion and growth.
Rail and roadway connections in and out of the port are critical to Long Beach’s competitive position. “We offer the ease of getting in and out of this port on a daily basis,” says port spokesman Lee Peterson. “Rail will help us with our exports and making full cargo loads as well,” he says.
Cold chain operators in Long Beach are tapping into the business. Lineage Logistics operates a private 250,000-square-foot facility in the overweight corridor of Pier B. It features multi-temperature and convertible freezer and cooler rooms with 27,000 pallet positions and a 60-foot refrigerated dock.
“Automated terminals help speed up operations,” he says. “But automation has not moved forward as rapidly as it could. That is because of labour opposition.”
The Port of Los Angeles is investing heavily in its port information portal projects, a first-of-its-kind digital solution to help improve goods movement and cargo efficiency at the port.
But, Friedmann notes: “There is some scepticism whether or not an appointment system can work.”
By Karen E. Thuermer
Correspondent | Washington