Carriers will be increasingly restricted to its core strength—providing port-to-port services—as they continue to be squeezed out of the integrated logistics services industry, predicts Drewry Maritime Research.
The London-based maritime consultancy said Maersk Line’s recent news that it has agreed to sell the assets of its U.S. trucking subsidiary Bridge Terminal Transport “appears to recognize that one-stop shops are not the way forward [for ocean carriers]; that expansion via vertical integration should be replaced by greater focus on the provision of core services.”
This, said Drewry, is implicit in Maersk’s statement, which reads: “The sale will allow the group to reallocate resources to the strategic focus areas within shipping, energy and related activities.”
Providing forwarding services may still be a possibility, but through differently named subsidiaries working as stand-alone profit centers, Drewry added, citing Damco replacing Maersk Logistics, and the rebranding of NYK Logistics to Yusen Logistics.
The industry trend is not new, but seems to be gaining momentum in recent months. In June, Maersk Line announced the sale of its European railway company ERS Railways to Freightliner. In May Zim Line sold its holdings in two companies that own container manufacturing factories in China.
In April MSC announced the sale of 35 percent of its ports division Terminal Investments Limited to Global Infrastructure Partners, and in January, CMA CGM declared the sale of 49 percent of its container terminal-operating company Terminal Link to CMHI.
Much earlier, in 2010, Maersk already sold its stake in the logistics company Trans Siberian Express Service to InterRail, while others started reducing their involvement in third-party logistics services even before then.
“The implication is that the provision of home-grown integrated logistics services by ocean carriers is becoming a distant dream that is unlikely to be resurrected in the near future,” said Drewry.
“This will bring a smile to freight forwarders and independent third-party logistics companies who have been arguing for years that ocean carriers should stay out of logistics, for which being asset light has many advantages.”
One area where ocean carriers may be successful at extending their range of service is in rail- and barge-based intermodal services to and from the port, by leveraging their volumes and buying power.
Factors encouraging the trend to refocus on core services include carriers’ growing debt and overcapacity.
According to analysis by Drewry Maritime Equity Research, ocean carrier debt has more than doubled over the past five years, from $47 billion to $100 billion.
“During this period of extremely weak profitability and constrained cash flows, ocean carriers piled on excessive debt not only to finance their order books, but also to raise expensive short-term debt capital to finance their working capital needs, leaving little for the development of anything else,” Drewry said.
The lopsided demand-supply situation is also spurring the return of ships to core services, making it easier for independent forwarding agents to provide more customer-focused supply chain management solutions.
Drewry estimates that since 2009, the ocean freight market share of forwarders has consequently risen from 35 percent to 51 percent. Twenty years ago, when carriers were still contesting the LCL market, it was just 15 percent.
Forwarders’ share of the eastbound trans-Pacific trade lane has remained largely static in recent years at around 38 percent. On the other hand, their share of the mighty westbound trade lane from Asia to Europe has grown from just over 50 percent in 2009 to 66 percent today.
Photo: Rennett Stowe