ONE and its Japanese owners suggest restructuring in shipping

Finally, the restructuring of the Japanese container sector has taken place. The Ocean Network Express or ONE was launched at the beginning of April, with NYK, ‘K’ Lines and Mitsui OSK Lines converting their subsidiaries into equity in the new company. Its vivid maroon containers and vessels will now be a significant presence in the container shipping market.

ONE appears to have got off to a slightly shaky start with several complaints appearing in a variety of channels about deterioration in the quality of service, particularly focussed around the computerised booking service. This is probably unsurprising bearing in mind ONE is the product of a merger rather than a takeover, making the imposition of central control harder. These are likely to be short-term problems. However, the last financial results of the constituent shipping lines released yesterday, gave an insight into the new company’s longer-term commercial future and that does not look so different from the past, with respectable revenue growth but profits depressed by a surfeit of new vessels on the market.

The Japanese logistics sector has changed to a degree. Mitsui OSK and ‘K’ Lines are now both heavily focussed on car carrier shipping, bulk shipping and LNG. Yet they still look somewhat similar to each other and one might speculate what their future could be. It is tempting to think that further mergers could be possible.

The big one, of course, is NYK. It is an interesting business, also with major investments in niche areas of marine transport such as finished vehicles and LNG. Where it differs is that these shipping businesses are complemented by the Yusen contract logistics and forwarding divisions.

Overall there appears to be a bifurcation between specialist or niche business with entry barriers that often rely on possession of specialist infrastructure or positioning in the market such as the LNG business. On the other hand, there are dedicated commoditised providers whose strength is their ability to work container assets hard, the best example being Maersk. Where CMA CGM’s investment in CEVA fits on this scale, however, is hard to say.

Not only has there been consolidation in the container market, there is also an ongoing restructuring as companies seek to adjust their business model and improve their margins. This is being driven by continuing poor returns in container shipping. The result appears to be the emergence of some type of shipping/ logistics service hybrids.

Source: Transport Intelligence, May 1, 2018

Author: Thomas Cullen


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