Sunday 22nd Oct 2017 - Logistics & Supply Chain

Shipping consolidation challenge to global supply chains

The importance of the liner shipping industry to global supply chains is highlighted by the fact that every day an average of 350,000 TEUs are moving around the world.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

But despite the colossal scale of container shipping movements, the industry is expected to lose about $5 billion this year, according to shipping consultancy Drewry.

The financial collapse of Hanjin Shipping of South Korea in August sent a shockwave through the industry, so it is no surprise that the major lines are taking action to restore their profitability.

The latest move is the agreement of three lines, NYK, Mitsui OSK and Kawasaki Kisen Kaisha (K Line), to merge their container shipping operations into a new joint venture.

A statement from the three partners highlighted the need for consolidation in the face of over-capacity and low profitability.

In September, AP Møller – Mærsk, the world’s largest container line, reorganised its business to integrate its all its transport and logistics operations in the search for synergies and operational optimisation. Significantly, it said that it planned to grow both organically and through acquisitions.

At the same time, the container lines have been creating a series of alliances to boost operational efficiency. NYK, Mitsui OSK and K Line are all member of THE Alliance which plans to start operations in April next year. Hapag Lloyd, another member of THE Alliance, is in the process of merging with UASC.

In June, Hyundai Merchant Marine started discussions on joining the 2M alliance of Maersk Line and Mediterranean Shipping Co (MSC).

There is evidence that these moves will result in rates hardening over the next year – after all no industry can afford to carry on losing money at the rate of $5bn a year. But shippers will also be looking to the lines to absorb some cost through efficiency improvements.

What is clear is that the structure of the liner shipping industry is changing and that could have an impact on the way shippers view their extended supply chains in the future.

 

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