Commentary: The winter of shipper discontent

Chaos in the ocean shipping industry has led to a winter of shippers’ discontent as freight transportation managers scramble to determine how carriers will meet their transportation requirements after several carrier mergers and acquisitions took place.

   2016 turned out to be an unbelievable year for ocean carrier consolidation. Many industry analysts previously forecast the need for inefficient and unprofitable carriers to be absorbed by their stronger counterparts, but not nearly to the degree witnessed over the past 12 months.
   It all began just before the start of the year with CMA CGM’s takeover of APL, followed by the merger of the Chinese giants COSCO and China Shipping, Hapag-Lloyd combining with United Arab Shipping Co., then the formation of a joint container service between Japan’s MOL, NYK and “K” Line, and it finally ended with the announcement by Maersk Line it would acquire Hamburg Süd.
   On top of this, there was Hanjin Shipping’s late August bankruptcy announcement, which left many shippers and non-vessel-operating common carriers scrambling to get their containers released from the beleaguered South Korean carrier’s seized or stranded ships. The assets of this once prominent carrier are now being picked apart in bankruptcy court and will undoubtedly be absorbed by others.
   The vessel-sharing alliances in which most of these container carriers operated, as a consequence, have also been reduced from four to three – the 2M, OCEAN, and THE alliances. As more carrier mergers and acquisitions are announced, these alliances will continue to shuffle their decks.
   This begs the question: which carriers are next? Will Taiwan’s Evergreen and Yang Ming, OOCL, Hyundai Merchant Marine, or ZIM be merged or acquired? ZIM recently denied rumors it is looking to sell its global container shipping operations, but even this might still change as carriers adjust to new realities in the months ahead. Anything and everything appears to be on the table in terms of mergers and acquisitions in today’s liner shipping industry.
   The carriers rationalize the M&A activity, along with the changing alliances, by saying it will allow them to reach more customers, increase their services via more routes and port pairs, and manage their expensive assets (ships and containers) more efficiently, as well as raise rates – all with the goal of improving their bottom lines.
   The chaos in the ocean shipping industry, on which so many of the world’s goods are dependent, has led to a winter of shippers’ discontent as freight transportation managers scramble to figure out how these newly formed carriers will meet their transport requirements. This will surely surface at the negotiating table as shippers begin their annual service contract talks with carriers in the early months of 2017.
   What shippers, and for that matter NVOs, should do now is educate themselves about these changes through trusted industry news and data sources, such as American Shipper and BlueWater Reporting, and endeavor to understand exactly how they will impact the ocean freight transportation management landscape next year and beyond.
   If potential liner carrier abuses are spotted, report them to the U.S. Federal Maritime Commission and similar regulatory authorities abroad. Make noise. Be a successful part of the ocean shipping industry’s new order, not a victim of it.