DC Velocity - December 2016

28 DC VELOCITY DECEMBER 2016 www.dcvelocity.com newsworthy

The container shipping industry finds itself once again in a period of turmoil and uncertainty, with no end in sight.

Hanjin Shipping Co. Ltd.’s bankruptcy served to exacerbate an already unsteady situation, and the recently announced joint venture among Japan’s three largest container carriers—NYK Line, Mitsui O.S.K. Line, and K Line—is widely viewed as a harbinger of more consolidation to come.

Speakers on a panel at the Coalition of New England
Companies for Trade’s (CONECT) 15th Annual Northeast
Cargo Symposium reeled off a litany of challenges facing the
container shipping industry. John Reeve, a longtime mari-
time industry consultant, cited forecasts that carriers could
lose as much as $10 billion in 2016, noting that container
lines can no longer grow their way out of their troubles.
Fast-growing economies like China and Brazil that boosted
demand for shipping services have dramatically slowed, and
“the days of converting cargoes from air to ocean are over,”
he said. Relatively new containerships are being scrapped,
and although Reeve expects container rates to gradually
increase, any rise will be very limited due to continuing
overcapacity, he said.

The year has seen three major mergers: CMA-CGM and Neptune Orient Line, COSCO and China Shipping, and Hapag-Lloyd and United Arab Shipping Co. With virtually all of the major container lines in the red, further concentration in the industry is “quite possible,” Reeve said. But much will depend on the motivation and attitudes of the government players that exert influence over many of the world’s shipping lines, he added. Reeve also noted that Maersk is “probably in the market” for a merger.

At least one carrier, Hyundai Merchant Marine (HMM), has demonstrated that it’s possible to come back from the brink. An announcement by its parent, the giant Korean industrial conglomerate Hyundai Group, that the carrier was in danger of collapse left competitors, including Hanjin, expecting a bankruptcy. But a swift restructuring between March and June changed everything, said Michael Vaccaro, vice president of Hyundai Merchant Marine America and Hyundai America Shipping Agency.

After spinning off from its parent, HMM generated more than US$1.3 billion in working capital by selling off such assets as its bulk business and Hyundai Securities division.

Panelists: Container industry chaos likely to continue

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