Major Changes Continue in Ocean Carrier Marketplace
Following the August 31, 2016 filing of bankruptcy by Hanjin Shipping Co., which was formerly the 7th largest ocean carrier, major shifting in steamship alliances are continuing to impact the marketplace. On December 1, 2016, A.P. Moller Maersk announced that it would buy German rival carrier Hamburg Sud and, on Sunday, December 11, 2016, Hyundai Merchant Marine announced that it would enter into a cooperative relationship with the 2M Alliance. All three events, from the bankruptcy to the mergers and acquisitions, are the result of continuing overcapacity among shipping lines that has led to the worst rate down-cycle in decades.
Hamburg Sud operates 250 offices around the globe, and generated revenues of over $6 billion from their fleet of 130 vessels last year. The acquisition will strengthen Maersk’s position as the largest container shipping line in the world, and the Journal of Commerce reports that the combination will improve Maersk service along north-south global trade routes. The addition of Hamburg Sud’s 3.8 million TEU capacity will give Maersk approximately 18.6% of the global market share and widen the gap between Maersk and second-ranked Mediterranean Shipping Co. (MSC), which has a 13.6% market share. Maersk and MSC cooperate through the 2M Alliance, the largest of the four major ocean carrier alliances which is particularly dominant on Transatlantic and Europe-Asia shipping routes.
The December 11, 2016 announcement by Hyundai Merchant Marine (HMM) that it has entered into a vessel-sharing agreement with the 2M Alliance will further bolster the capacity of that alliance. A three-year agreement, which will begin in 2017 following regulatory approval, will allow HMM to purchase or share cargo slots on Maersk and MSC ships. This is a common arrangement among ocean carrier alliance partners throughout the industry and helps the carriers to fill capacity at a time of historic overcapacity and low rates. Additionally, Maersk and MSC will take over the charters and operations of several ships currently chartered by HMM. The overall agreement was critical to HMM creditors and shareholders who saw firsthand the impacts of the bankruptcy proceedings of rival Korean shipping line Hanjin Shipping Co.