Shrinking Carrier Competition: Hapag-Lloyd Makes Deal to Acquire Zim
Competition on the waters of international shipping looks to be shrinking again as the world’s fifth-largest ocean freight carrier, Hapag-Lloyd, made a buyout deal yesterday to acquire the world’s tenth-largest carrier, Zim.
Greg Knowler knows all and reported on the deal in a Journal of Commerce (JOC) article:
Hapag-Lloyd inked a $4.2 billion deal Monday to acquire 100% of Zim Integrated Shipping Services, cementing the buyer’s position as the world’s fifth-largest container shipping company with a fleet of over 400 vessels, a slot capacity of over 3 million TEUs, and an annual transport volume of more than 18 million TEUs.
Financing the transaction from cash reserves and a $2.5 billion bridging fund, Hapag-Lloyd will take over the international operations of Zim but leave control of domestic operations to Israel-based private equity group FIMI Opportunity Funds.
The deal is expected to be completed by the end of the year, subject to approval of Zim shareholders and regulatory approval in several jurisdictions.
Falling Carrier Competition
In the days before tariffs and war- or even pandemic-related freight rate craziness dominated international shipping and filled Universal Cargo blog posts, one of the biggest topics was shrinking competition in the international shipping industry. There were buyouts, mergers, carrier alliances, and even a major carrier bankruptcy tightening an ever-smaller number of carriers’ grip on the international shipping industry.
It got to the point that Maersk expected carrier competition to shrink to just three global carriers.
In a JOC article entitled “Hapag-Lloyd’s plan to acquire Zim would deepen shipping oligopoly,” Mark Szakonyi does a great job of summarizing just how much competition has shrunk in the international shipping industry:
The deal would further advance consolidation in an industry that has gone from more than 20 major east-west ocean carriers over 25 years ago to just 10. The top five carriers control 64.5% of global capacity while the top 10 control 84.1%, according to Alphaliner. As recently as 2013, the top 10 lines controlled just over 60% while in 1996 the top 10 carriers controlled 48%, analyst Lars Jensen wrote in “Liner Shipping 2025.”
The obvious danger for shippers with this shrinking waterfront of ocean freight carrier competition is higher freight rates.
Between fewer carriers existing in the market, the top carriers controlling most of the capacity, and all the major carriers organizing themselves into alliances, shipping lines have become adept at manipulating capacity supply, increasing upward pressure on freight rates, and turning shipping disruptions into highly profitable shipping markets for themselves.
While tariffs and trade deals have rightly dominated international shipping headlines over the last year, shrinking ocean freight carrier competition is still a crucially important storyline happening in the background. To give just a feel for the shrinking nature of the ocean carrier market, here’s a compilation of several related-to-the-subject blog posts Universal Cargo has published over the years. And this is by no means a comprehensive list:
World’s Largest Container Shipping Carriers Form Triumvirate
CMA CGM Forms Ocean Three Alliance with UASC & China Shipping
Holy Cargo Collusion, Batman–Shipping Companies Under Investigation!
Hapag-Lloyd CSAV Sign Merger: Now 4th Largest Shipping Carrier
Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance
Catching Fire on the Sea: International Shipping Moves & Counter Moves
Mockingjay Asks What Effect Do Carrier Alliances Have on Shippers?
Carrier Craziness Bracket! International Shipping Alliance Overview
Ever Shrinking Carrier Competition – Hapag-Lloyd and CSAV Merging
Carrier Alliances’ Impact on 2015 International Shipping
China Fines Shipping Companies & Joins US & EU Antitrust Cooperation
Movies Over But Hunger Games of the Sea Continue w/ Merger & Buyout
Here Comes China Cosco Shipping Corporation, Shipping Leviathan
How New Ocean Alliance Is Already Shaking Up International Shipping
And Then There Were 3… Carrier Alliances
S. Korean Carriers Hanjin & HMM Could Be Forced Into Merger
Hanjin Collapses – How Badly Will it Hurt U.S. Shippers?
Divide & Conquer: Maersk Splits to Go After Competition
Hanjin Sells Stake in Terminal at Port of Long Beach to MSC
OCEAN Alliance Approved by FMC
Should Maritime Regulators Rethink Carrier Alliances?
Surprise Move – Korea Line Buying Hanjin’s Asia-US Assets
Shrinking Carrier Competition: Japan’s 3 Big Carriers Merging
THE Alliance Teams Up with Zim
SM Line to Replace Hanjin, But Will Yang Ming Follow Hanjin’s Footsteps?
Shrinking Carrier Competition: Cosco Buying OOCL
Carrier Alliances Bring Real March Madness for Shippers
Japan’s Big 3 Becoming ONE in Practice & Name
Holy Crap! Maersk & IBM Team Up to Change International Shipping!
ONE Is in Business Starting Today
How Did Carriers Go From Looking at Billions in Losses to Billions in Profit in 2020?
Are Ocean Freight Carriers Profiteering from Global Crisis?
Is the Government Going After Carrier Alliances?
Carriers Fined Millions for Price Collusion Call Fines Insignificant as They Make Billions
Are Ocean Freight Carriers Taking Control of Too Much of the Supply Chain?
Carrier Alliance Reshuffle Moves Are Happening
How MSC and Maersk’s 2M Alliance Split Will Affect Shippers
