If you can’t beat them, join them, is the old saying.
That seems to be the premise under which most European container carriers are operating these days, since the idea of merging becomes more and more a possibility in the era of capacity oversupply and low demand and rates.
This was the trend of a recent report by Bloomberg.
As a way to cushion the impact of the current crisis, reducing costs and improving access to finance, players of all sizes and on varied routes are considering joining forces.
Maersk Line, the world’s largest shipping company, has earned its place as one of the few container carriers that has achieved profits in recent years. But this has not been done for free. Maersk’s success suggests that economies of scale are key when it comes to protecting against the lows of the industry.
Therefore, fewer actors in quantity but larger in capacity could just be the lifeline that the shipping industry needs to stay afloat.
According to reports, the German shipping company Hapag-Lloyd AG (sixth in the world) is in talks to merge with Hamburg Sued (ranked 12th), indicates Bloomberg. Together, the two carriers would have a capacity just under Maersk Line, CMA CGM and Mediterranean Shipping Company (MSC).
While Hamburg Sued focuses on North-South routes, Hapag-Lloyd operate mostly on east-west routes, and between Asia and Europe.
The boards of both companies have been analizing, since December 2012, “whether and under what conditions a merger would be of interest,” says the Bloomberg report, specifying that no official source was available for comment.
According to analysts quoted by the report, a merger between the two carriers would have operational benefits, increase the earnings base and lead to cost reductions.
However, despite the latent possibility of mergers on the horizon of the shipping industry, analysts surveyed by Bloomberg believe that there will be a proliferation of mergers in the coming years, since much of the potential for consolidation has already taken place.
The strategy to combat low rates by merging is not new to the shipping world. Some of the giants today are the result of past mergers. France’s CMA CGM was created through the merger of Cie. Maritime d’Affretement and CGM in 1996. Then, in 1998, it acquired the Australian National Line (ANL). Taiwan’s Evergreen Marine Corp. has absorbed companies such as Marittima Uniglory and Italia Marittima in recent decades. Meanwhile, Maersk has acquired companies which include container operations of Sea-Land Services and Royal P & O Nedlloyd, according to the report.
This post is also available in: Spanish