SAINT SIMONS ISLAND, GEORGIA (FEBRUARY 9, 2016) – Shippers expressed concerns about the rapid pace of consolidation in the shipping industry at the Georgia Foreign Trade Conference here today.
“We’ve had a situation this year where we’ve seen CMA buy APL, you have the two big Chinese containers merging, COSCO and China Shipping, and the combination of two things: [those mergers] and the potential for it happening further,” said William Rooney, vice-president for trans-Pacific sea freight at Kuehne + Nagel.
“[You could] end up with a situation where you’re going to probably have two very large conferences that account for high-20% of global capacity. You have 2M and you’re likely to have another very big conference that centres around CMA and some other players that is going to be 26, 27, 28% of global capacity,” he said.
And then, he says, the industry is likely to end up with “a whole bunch of players who are left out in the cold,” each of whom will have with 2% or 3% of global capacity, which he calls an “untenable position if you’re in the carrier business.”
Rick Gabrielson, vice president of transportation at home improvement retailer Lowe’s Companies, expects to see more mergers before the merger activity is done. “I get concerned when I take a look at the changing landscape. The activities that are just taking place, I think is just the start.”
Gabrielson says that the industry has talked about consolidation for many years. “It’s not a new subject, but we’re beginning to see it take place,” he said. “It will change the alliances. It’s really scary if you’re a shipper.”
Excess capacity plays into those fears, he told the conference. “Very clearly, there are way too many vessels and too much capacity that’s out there. You get concerned about where carriers are at from a financial health standpoint, how that plays into the terminals they’re serving, the alliances that have formed.”
The alliances have also led to what Joshua Dolan, vice president for international operations at US retailer Target Corporation, calls the commoditization of freight. “The commoditization of freight in general, even given market-based pricing, has put us in a place where, through these alliances, we’ve continued to have a further degradation of differentiation between carriers,” he said. “As we think about not just this year but certainly the year after, we’re trying to make sure that we position ourselves the right way this year as we look out over the next two to three years because of the potential for further tumult.”
