Ocean carrier consolidation not likely to have immediate impact on rates

The proposed acquisition of Singapore’s APL by the French giant CMA CGM would be the largest consolidation move in the history of the container shipping industry, based on the size of the fleet operated by the acquired company, according to Alphaliner – a Paris-based think tank.

As reported here earlier this week, Neptune Orient Lines (NOL), the parent company of the ocean carrier APL, confirmed it entered into an exclusivity agreement with the French shipping line CMA CGM to negotiate a potential acquisition of NOL.

APL’s current operated fleet of 541,000 twenty-foot equivalent units (TEUs) is larger than the 460,000 TEUs operated by P&O Nedlloyd in 2005, when the latter was acquired by Maersk.

However, APL has a current global capacity share of 2.6 percent, which is lower than P&O Nedlloyd’s capacity share of 5.5 percent in 2005. It is also below the 3.6 percent share held by Sea-Land in 1999, at the time of its acquisition by Maersk (excluding the U.S. domestic fleet that was not part of the deal), Alphaliner says.

In addition, the CMA CGM-APL deal could also be dwarfed by the the planned merger of COSCO and CSCL’s container shipping businesses, expected to be finalized in the coming months.

NOL also said that it was in preliminary discussions with Danish A.P. Moeller-Maersk A/S with respect to a potential acquisition.

“However, the industry signals that the French giant may be a better fit for NOL,” says Alphaliner. 

Analysts for London-based Drewry Supply Chain Advisors, note that CMA CGM is smaller than Maersk in the Transpacific and would benefit from access to APL’s large base of high-end textile and other time-sensitive product customers, as well as its profitable U.S. government contracts linked to the use of U.S.-flag vessels, both of which Maersk already has.

Stijn Rubens, a Senior Consultant with Drewry told LM in an interview that shippers should be concerned about consolidation in the trades, but were not likely to see a dramatic hike in rates very soon.

“As long as there is over capacity in the market and sufficient sales channels that are willing to undercut each other, the rates will not increase in a sustained way,” he says.