Dive Brief:
- CMA CGM is targeting consolidation efforts towards small to medium companies which are reeling following the collapse of South Korea's Hanjin Shipping, according to Reuters.
- Separately, A.P. Moeller-Maersk announced yesterday its Maersk Line would lead a separate transport and logistics division from its oil services, so the shipper can focus on growing its market share, the Wall Street Journal reports.
- The two companies are the third largest and largest container shipping companies in the world. Reuters adds CMA CGMI believes smaller shipping companies will either have to join a larger outfit or fail as the industry consolidates.
Dive Insight:
The collapse of Hanjin may have sparked good news for other shipping companies to gather up shippers that have been caught in the downward spiral of the freight industry.
A Drewry analysis reports alliances between robust lines are forming to ensure more efficient service, and ports are turning to contract-based hub models to secure inbound services. The shipping industry, it appears, is following in the footsteps of a more consolidated airline industry which relies on global alliances, not vertical offerings, to secure worldwide service.
Hanjin accelerated this process by exposing the issues in the industry and increasing stakeholder pressure for various smaller companies. Since Hanjin's collapse, various struggling shippers have come under media spotlight as symbols of a general overcapacity and a slowing market. Alliances, too, became evident as several companies — such as Maersk and the Mediterranean Shipping Company, or various Korean Shippers — banded together to fill the service gap left by an inactive Hanjin.
But what happens to the supply chain as the industry consolidates?
At first, good results are likely. Mergers, acquisitions and alliances will slowly correct excess capacity by introducing new efficiencies to the industry. Port contracts will decrease the actors within a shipping hub and potentially decrease congestion.
Long term repercussions could include a potential increase in rates through reduced competition, as well as shifts in supply chain routes through port preferences. However, as much as the stars are aligned, these effects will depend on the speed and degree of consolidation, which is but speculation at this stage.
