Merger among shipping lines improbable

The merger between maritime lines like CMA CGM and Hapag Lloyd is improbable to occur, according to Simon Heaney of Drewry, maritime transport research and analysis firm.

The main reasons for the impediment of a merger is that the countries’ anticompetitive regulation and control entities could complicate the consolidation by breaking against fair competition rules.

The rumors of the merger went on the air when Reuters mentioned an exploratory approach between Hapag and CMA CGM. However, a communication from Hapag Lloyd denied that these market rumors would not materialize.

Shipping lines have recently been under pressure with ideas of consolidation between them in order to improve their cost efficiency in a market affected by increasing overcapacity.

Despite an increase in freight rates and a recovery of the market balance in demand with supply, 2018 is seen as a complicated year for containerized lines.

Shipping lines are again assuming losses that will possibly show in the second quarter of 2018. These losses are attributed to the inability to capitalize on the growing demand and increase in costs derived from the increase in the price of fuel.

Despite the imposition of GRIs (surcharge for fuel price increase) presented mid-year, it will be difficult for them to recover from these cost overruns.

Drewry affirms that the cost overruns in fuel for the industry are quantified in USD 7 billion unlike in 2017, which has forced the lines to explore new ways to reduce their costs such as suspension of services, or the possibility of slow steaming in the future. Mainly because, 2018 will be a break even for carriers leading to a sudden increase in freight rates for 2019.

They estimate an increase in the demand for freight of 6.5% by 2018 thanks to the recovery of the global economy that would continue with 5% in 2019. This figure will be revised taking into account the trade war between the United States and the world that is currently happening.