What is more, the severe glut of vessel space and expected fresh deliveries ominously undermine shipment rates for another three years, or more. This has proven that the consolidation of the highly fragmented sector is long overdue, particularly when comparing with such other heavily capitalized transportation sectors as railroads and airlines. Apart from this, M&A now offers an additional cost cutting options, notably by eliminating redundant overhead.
For instance, on April 29, 2016, global leader in container shipping, France’s CMA CGM, announced the European Commission had approved its US$2.4 billion acquisition of Singapore’s Neptune Orient Lines (NOL) (SGX: N03), South East Asia’s largest container shipping company, on the condition that NOL leave the G6 shipping alliance. The acquisition will enable the French line to reinforce its position as a leader in the container shipping industry with a capacity of almost 2.4 million TEUs, a market share of 11.7%, a fleet of 540 vessels and a combined annual turnover of around US$21 billion.
In Shanghai on April 20, 2016, CMACGM, China Cosco Shipping, Evergreen Line and Orient Overseas Container Line (OOCL) formed the Ocean Alliance, offering more than 40 global services connecting markets in Asia, Europe and the US. Subject to regulatory approval, the alliance, due to last for five years, plans to begin operations in April 2017. Its service networks will cover the Asia-Europe, Asia-Mediterranean, Asia-Red Sea, Asia-Middle East, Trans-Pacific, Asia-North America East Coast and Trans-Atlantic routes using a modern fleet of 350 container ships.
As M&A heightens, the shipping and logistic landscape is changing rapidly. When there is too many M&A, should shippers be concerned? Maybe, yes. It still depends on the each shipper's specific needs and requirements.
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