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Newsletter August 2016
BIG CHANGE IN THE SHIPPING BUSINESS
3 Major Steamship Carriers Are Merging
 It was announced today that 3 major steamship lines have decided to create a joint venture:  NYK, MOL, and K-Line, major Japanese carriers, will merge their containerized shipping operations, both at sea and on land.  The merger considers all assets not in Japan, and will create the 6th largest steamship line in the world, enjoying some 7% of global market share.
 
As noted, the very recent bankruptcy of Hanjin, Korea’s largest steamship company was another casualty of the current market conditions:  Asia’s slowdown in manufacturing and the launch of new ships commissioned to be built during the strengthening market conditions of 5 years ago.
 
The supply and demand forces in play today consider less global cargo than foreseen, and the overabundance of anticipated capacity projected needing to carry it.  This imbalance applies downward pressure on pricing which yields an inability to collect enough cash to keep current on today’s expenses.  The containerized shipping market is cyclical: carriers buy/build ships when they’re cheap in hopes that when they come on line they will enter the market at a projected pricing peak a few years later.  This time they didn’t foresee today’s downturn in China’s manufacturing tonnage and are caught with more ships than they need to carry today’s dwindling amount of existing cargo destined for North America and Europe.
 
The establishment of the new joint venture is planned to take place in July 2017, and will target the initiation of service around April 2018.  The new name for the enterprise will be announced during that timeframe.