Supply Chain Matters has been highlighting these past few weeks on the beginning of significant consolidation among ocean container carriers in 2012. Events began with leading carrier Maersk Line launching daily ship sailings from Asia to Europe, which placed additional competitive pressure on the rest of the industry. The was followed by the industry’s second and third biggest carriers, Swiss based Mediterranean Shipping Company (MSC) and France based CMA CGM announcing plans to jointly align capacity in a broad based partnership spanning select routes. That alliance posed a threat to overtake Maersk in terms of shipment volumes. MSC additionally invited other carrier lines to join this alliance.
The latest announcement in this cascading set of events is the potential of a mega-alliance in Far East-Europe trade. Six other container shipping lines have announced the formation of an alliance that could potentially include 90 ships spanning 40 different ports. This so-termed G6 Alliance, scheduled to take effect in April 2012, includes may other industry players who have elected to respond with even broader shipper options for routes spanning Asia-Europe and other routes.
Adding more pressure to the industry are reports that the effects of the Eurozone financial crisis will add more challenges, not only for ocean and transport carriers, but airlines as well. These industries now face significantly higher bank borrowing costs as European banks pull back from existing lending. The Wall Street Journal recently reported that companies now have to turn to the bond market or new banks to secure financing. There is some speculation that orders for any new vessels, or major overhaul of existing vessels could be severely impacted by credit restrictions.
The winds of a pending shakeout and consolidation within the ocean container industry are growing stronger and with several additional mega-ships scheduled for operational launch in the next few years, the problem of over-capacity becomes ever more extreme. Manufacturers and retailers should have their transportation and logistics teams highly focused on industry developments, including even more restructuring and consolidation.
Now, more than ever, is the time to have various contingency options available.