Asia/Pacific News
Box Shipping Unsustainable at Current Rates: Singapore Shipping Association
Analysts say Neptune Orient Line's (NOL) current talks with France's CMA CGM over a potential takeover is yet more evidence of a consolidation trend in the global shipping industry, which is being driven by unsustainably low rates, CNBC reports.
"There is definitely a consolidation trend going on," Esben Poulsson, president of the Singapore Shipping Association, told CNBC's The Rundown.
"At a difficult moment of the cycle, consolidation is obviously a way for these players to gain greater market share and greater strength toward the customers."
Poulsson added that should the NOL/CMA CGM takeover occur, the price of the transaction "will reflect that we are in a difficult period."
Carriers have been struggling for a large portion on the year with overcapacity and low rates, and are currently making a loss on key routes.
With another 1.3 million twenty-foot equivalent units (TEU) of capacity being added to the world container fleet next year, Poulsson said "There's simply too much capacity, and obviously at these current rates it's not a sustainable business, it cannot continue on a long-term basis."
Talk of the proposed consolidation comes on the heels of talks between China's Cosco Group and China Shipping Group which are also said to be looking at a possible merger.
Potential mergers are also not confined to the shipping industry.
In June, international law firm Willkie Farr & Gallagher LLP predicted that sinking oil prices will soon lead to oil companies and suppliers working toward more mergers, acquisitions, and even bankruptcies.
