Are mergers on the horizon for ocean carriers?

The ocean shipping industry appears to have survived the Great Recession. But with most container lines still unprofitable and "undisciplined pricing" continuing to plague the industry, some consolidation is likely in the next five years, predicts John G. Reeve, a longtime maritime industry consultant.

In a November presentation at the Coalition of New England Companies for Trade (CONECT) Northeast Cargo Symposium, Reeve noted that consolidation has slowed in recent years from the torrid pace recorded from 1995 to 2005. But today's difficult times might provide new incentives and opportunities for companies with stronger balance sheets to engage in strategic mergers, he said. And if Europe's economic uncertainty continues over the longer term, "there may be some forced marriages to keep carriers alive," he predicted. Furthermore, if downward pressure on rates persists while trade growth fails to keep up with capacity increases, "we may see some government intervention" in the container trades, particularly in Asia, he said.

Carriers that are subject to shareholder pressure may be pushed into mergers, Reeve said. Even Cosco, once fully supported by the Chinese government but now a private enterprise, is under pressure to find ways to further reduce costs, and a merger is one possible way to do that, he said. Another development that could lead to fewer container lines down the road: Denmark's A.P. Møller-Maersk, a semi-public company with shareholders, is rumored to be considering scaling back or selling off its container business. When a conference attendee noted there had been speculation about Maersk Line's uncertain future in the container trades, Reeve replied that Maersk Mc-Kinney Møller, who led the shipping conglomerate as CEO and chairman for more than 50 years, had championed the company's container business, but his death in 2012 will likely prompt management to "take a more rational look" at that business.