With the bankruptcy of Hanjin this fall, many industry analysts questioned the viability of CKYHE alliance partner Kawasaki Kisen Kaisha (K Line), but news from Tokyo this past weekend confirmed that the troubled carrier has found a new home.
K Line, Mitsui O.S.K. Lines Ltd., and Nippon Yusen Kabushiki Kaisha have agreed, after the resolution by the board of directors of each company held, and subject to regulatory approval from the authorities, to establish a new joint-venture company to integrate the container shipping businesses (including worldwide terminal operating businesses excluding Japan) of all three companies and to sign a business integration contract and a shareholders agreement.
“The new joint-venture company is expected to create a synergy effect by utilizing the best practices of the three companies. And by taking advantage of scale merit of its vessel fleet totaling 1.4 million twenty-foot equivalent units (TEUs), realize integration effect of approximately 110 billion Japanese Yen annually and seek swiftly financial performance stabilization,” says Kiyoshi Tokonami, K Line’s General Manager, Investor & Public Relations Group.
“By strengthening the global organization and enhancing the liner network, the new joint-venture company aims to provide higher quality and more competitive services in order to exceed our clients’ expectations.”
Meanwhile, the newly announced Japanese container giant leaves behind four medium-sized container carriers, including Hamburg Süd, in the major consolidation wave which hit the industry in 2016, notes shipping analyst Lars Jensen, CEO of Seaintelligence Consulting.
The consolidation of Japan’s three largest shipping companies will create the world’s fifth largest ocean carrier with 7.25% of global capacity, adds Dr. Zvi Schreiber, CEO and founder of logistics tech company, Freightos.
“We know that carriers are surviving in this new environment by grouping up, as 75% of global TEU capacity is included in the three major alliances that will be in play in early 2017: Maersk and MSC, OCEAN Alliance, and THE Alliance,” he says. This trend of consolidation isn’t solving the seismic issues afoot in global shipping which are better solved with innovative technology.”
Schreiber offers his perspective on what this consolidation signifies for the industry and puts it in context of the global shipping industry:
“The real Halloween horror story of 2016 is overcapacity. 3.4% of global shipping capacity will be demolished this year, compared to a 1% historical average, and Hanjin’s bankruptcy continues to loom as a warning sign,” he says.
While mergers and alliances can help carriers coordinate, it doesn't address the underlying problem of overcapacity and commoditization, he adds.
“Efficiencies driven by technology, transparency and more formal business relationships are key to global carrier survival.”