Paving the way to consolidation

Paving the way to consolidation

An increasing number of shipowners and operators are forging new partnerships.

With the international shipping industry taking care of more than five billion tonnes of the world’s seaborne transportation needs – a figure which is expected to grow by 100-200 million tonnes per annum – shipping companies are expected to offer increasingly sophisticated services to meet a broader range of transportation needs.

As the new Millennium approaches, a number of shipping companies are following the trend of pooling together their resources in the belief that such actions will strengthen operations, reduce competition and make for a more stable and better based industry.

One sector which looks set to reflect the trend is that of vehicle/car carriers. A recent spate of mergers and new alliances have resulted from the surge in demand witnessed around late 1996 which continued into 1997.

At the start of this month, two of the sector’s biggest players, Wilhelmsen, and Wallenius Lines, will merge, reflecting the general trend towards consolidation. The newly-formed company is owned on a 50:50 basis by the Norwegian and Swedish companies. Both companies will continue to own all their vessels and in total it will operate more than 70 specialised vessels which, it claims, makes it the largest supplier of vehicle and roro transportation services.

The new partnership will provide transportation for cars, other vehicle types, roro equipment and non-containerisable cargo, in addition to container capacity in certain markets.

Hot on the heels of last year’s well-documented NYK/Showa Line Ltd merger came the announcement this year that two other big Japanese names were to merge their operations. The merger between Mitsui OSK Lines (MOL) and Navix Line (Navix) is described by the company as ‘an attempt to create the world’s largest shipping and total logistics organisation’. It is also certainly a direct attempt at countering the NYK/Showa merger, its main rival.

P&O Nedlloyd, itself the product of a 50:50 joint venture formed at the end of 1996, remains a strong advocate of consolidation in an industry sector where all are suffering, largely because of the Asian economic crisis. The company believes that there will be further consolidation in the industry and that the pace of such activity may well quicken. It says that it will continue to explore all avenues to maintain its scale advantage. The company is ready for further consolidation and says that it “has the track record to prove that we can handle it”.