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From the CSA President

Staying competitive in a brave new world

david jean marieThe brave new world of maritime trade, fueled by the growth of mega ships, is quickly coming to terms with significant issues related to competition among shippers and supply chain efficiency.

The advent of increasingly large ships has led to a reduction in the number of carriers that can efficiently operate on a route, and this has precipitated the rise in carrier mergers and alliance activities that are dramatically reshaping the shipping landscape.

The latest development in this trend is the planned acquisition of the German container shipping line Hamburg Süd by the Danish titan A.P. Moller-Maersk, the world’s largest shipping line.

Against the backdrop of low freight rates and oversupply issues in the industry, this move is part of an effort to bolster the global trade presence of Maersk Line, particularly in the Latin American region. Completion of the regulatory approval process and final agreement are expected to take place at the end of this year.

Another merger is French group CMA CGM’s acquisition of Singapore-based Neptune Orient Lines, which has given it market leadership on transpacific routes. And there is also the German container shipping line Hapag-Lloyd’s merger with the United Arab Shipping Company (UASC). These mergers and acquisitions, in addition to the formation of alliances, are primarily geared towards increasing scale and lowering unit costs and overheads.

Michael Kaasner Kristiansen, former head of operations for Maersk Line for Latin America and the Caribbean, is on record as saying that carriers will seek to “reap much-needed synergies by combining east-west and north-south liner networks, using larger tonnage epitomized via transshipment”. He further stated that “systematic capacity management, deployment optimization and network synergies offer significant upsides” in a neopanamax world.

Shipping alliances

This prevailing dispensation will be ramped up in the second quarter of this year when the new shipping alliance structure comes into effect. The three major shipping alliances – The Alliance (Hapag-Lloyd, K-Line, MOL, NYK Line and Yang Ming), Ocean Alliance (CMA CGM, Cosco Shipping, Evergreen Line, Orient Overseas Container Line) and the 2M (Maersk, Mediterranean Shipping Line) – will finalize the deployment of new liner networks. Under this vessel sharing agreement, the alliances are poised to control North Asia, South Asia and Southeast Asia-North America trade with a market share of almost 90 per cent. It is increasingly clear that this burgeoning paradigm of consolidation has far-reaching implications for stakeholders in the maritime industry. For us in the Caribbean, it is important that we cultivate a deeper understanding of how mega ships, major lines and big network synergies will impact regional port and terminal operations, development, investments and activities in the wider shipping community.
What will be the nature of the competition among alliances fighting for market share and what are the financial ramifications? What pricing structures will emerge in this environment? Are niche markets or specialized service provision enough to keep independent, smaller carriers in business in the face of mounting pressure from shipping alliances? Will alliances ultimately engage in larger business transactions but provide significantly fewer business opportunities for ports and terminals? These are just a few of the many questions that warrant ongoing consideration and meaningful dialogue, which will allow us to get ahead of the challenges, promote a sustainable balance and increase profitability in the container shipping industry.

US trade policy concerns

Expanding on the topic of promoting a sustainable balance and prosperity in maritime trade, it is interesting to note that the area of free trade is gaining greater prominence as the new United States political administration continues to consider its policy priorities and economic agenda as it relates to global trade. Free trade is undoubtedly a major contributing factor to the success of the container shipping industry, as the free movement of goods gives rise to an increase in shipping demand.

The protectionist campaign rhetoric of President Trump, who called for a sweeping review of existing trade deals such as the North American Free Trade Agreement (NAFTA), has led to speculation that the US will seek to adopt a tougher stance on trade with global partners. President Trump has stated that he will deal with NAFTA’s renegotiation in his first 100 days in office. As he begins to put his trade agenda into motion, it is important for us to closely monitor the developments.

CSA Conference

Other important developments and topics that should remain on our radar will be addressed at the Caribbean Shipping Association’s 16th Caribbean Shipping Executives Conference, which will be hosted in the beautiful city of Willemstad in Curaçao from May 8 to 10. High-level shipping executives, industry and political leaders, insightful speakers and expert panelists will deliberate on a wide range of issues such as maritime and cyber security, inspections and compliance in maritime transportation, strengthening anti-corruption initiatives, the state of the global cruise industry and maritime business opportunities.

Additionally, consistent with our commitment to promoting a cleaner and greener marine environment, the conference agenda will explore the topic of vulnerable Caribbean coral reefs and coastlines and the establishment of the Caribbean Marine Environment Protection Association (CARIBMEPA).
I am sure this conference will prove a valuable resource for participants and an excellent forum to share ideas and promote the advancement of the regional shipping industry. I look forward to the stimulating and productive sessions that will take place in the picturesque and architecturally rich setting of Curaçao.

David Jean-Marie
Caribbean Shipping Association