The “fragmented nature” of the global container shipping market, according to Kenneth Glenn, president of APL, is in need of a change.
“The structure of the industry needs to change and ultimately there needs to be an acceleration of consolidation going on. And consolidation can address a lot of the instability that companies are facing, and the first step is to stabilise earnings as they are on a downward trajectory,” Glenn told delegates at the TOC Asia conference held in Singapore on Wednesday.
APL, the container shipping brand of Neptune Orient Lines (NOL), is itself now contributing to the level of consolidation as NOL is currently is the process of being acquired by France’s CMA CGM.
Maersk Line, the world’s largest container carrier, also believes that consolidation is “a good thing”, according to its Asia Pacific region chief executive Robbert van Trooijen.
“If the right opportunity comes we will look at acquisition options carefully,” van Trooijen said. Denmark’s AP Moller-Maersk had been in talks to acquire NOL but the deal eventually went to CMA CGM.
“Consolidation of the industry is a first step, then you also got to make sure that the product you offer to customers are competitive,” Trooijen said. He added that the container shipping industry remains “a bit archaic” due to the lack of recognition for innovation, as business has to be done in a different way now if the industry is to keep growing.
“There is a lack of topline growth and revenue has gone down, but if you see it the other way there is a realisation that operations can be run on lower cost,” he said.
The coming together of carriers is seen as one of the solutions to rationalise tonnage capacity, as vessel supply growth continues to surpass demand. Leading lines are already restructuring their alliances, indicating that they understand the need to come together in order to increase competitiveness, according to Glenn.
It was announced on Wednesday that CMA CGM, Cosco Container Lines, Evergreen Line and Orient Overseas Container Lines (OOCL) have signed an agreement to form the Ocean Alliance, a move that would reshuffle the existing alliances.