Thursday, December 10, 2015

CMA CGM to buy NOL (operating as APL). Consolidation in the industry continues.

CMA CGM, the French shipping company, has offered to buy NOL,  (formerly Neptune Orient Line) which is a Singapore company, and operates under the name of APL (formerly American President Line).

This sale will probably be approved by the various governments.  It's doubtful China would protest, as they are getting ready to merge COSCO and China Shipping.

These mergers are the continuation of consolidation in the container shipping industry.  However, it is not yet enough to improve their fortunes.   All of the carriers continue to believe growth will come, when they need to be realizing profits will not come by growth, but by increased efficiencies by each company.

Because the "per slot cost" has been the indicator for lowest cost in the industry, everyone has concluded that bigger is better, because each slot would then cost less.   However, those nickles and dimes in the other parts of business add up, and those costs of have been ignored by the carriers for years.

The industry is sadly lacking in efficient computer systems.  They allow terminal operators to run and dictate the shore side part of the business.  The carriers are unwilling to take on the unions.   They have become "wholesalers" of cargo, giving the NVOCC/consolidators  cheap rates because the carriers have been too lazy to deal with the difficulties of handling small shipments.

Just as it has taken 40 years after deregulation for the airline industry to see consolidation and profits, it will likely take this many years for the container shipping industry.

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