This comes from Bloomberg Businessweek:
“A.P. Moeller-Maersk A/S (MAERSKB) and its two main rivals may have their best chance yet to boost profit, say European shipping investors and banks. The key: joining forces to create the largest container alliance in history.
“Maersk Line teamed up with Mediterranean Shipping Co. and CMA CGM SA last month to pool 255 vessels on 29 loops covering the world’s three biggest trade lanes. The goal is to cut costs and end five years of overcapacity. The alliance, which starts in the second quarter of 2014, may boost freight rates as early as this month, sending a ‘clear message’ to customers that the price war is over, according to Deutsch Bank AG. ATP, Denmark’s biggest pension fund, with $ 140 billion in assets, said it expects Maersk stake to grow in value because of the deal.
“‘The hope is that this will make a big difference and the industry has really needed something to happen,’ Jonas Bhatti, a portfolio manager at ATP, said in an interview. ‘This means that Maersk Line will become more profitable. This is positive for Maersk as an investment …
“The Asian Shippers’ Meeting and the European Shippers’ Council said in a joint statement that they have ‘deep concern’ over the alliance. The group is seeking to ensure that the deal doesn’t ‘jeopardize or impair the free choice of shippers and fair competition based on price, service level and routing,’ the groups said on June 18.
“The container industry is suffering from overcapacity after a boom in ship orders coincided with the worst slump in freight demand since the 1970s. Vessel supply exceeds demand by about 30 percent and much of the boxed freight being shipped is unprofitable, according to BIMCO, the world’s biggest international shipping association …
“Managing supply amid overcapacity has proven ‘extremely difficult’ in the last few years, said Peter Sand, a Bagsvaerd, Denmark-based analyst at BIMCO, whose members control 65 percent of the world’s tonnage. ‘The elephant in the room that everyone is afraid to be talking about is that overcapacity is so severe that it may take many years before it disappears,’ Sand said in a phone interview. ‘Previously there were expectations in the market that the smaller container lines would disappear. That development hasn’t really happened.'” –
[“The goal is to cut costs”?? No. The goal is to raise prices to the consumer. Price fixing – or collusion – has always been considered illegal. And besides, it only works when prices can be driven down to a point where smaller competitors are forced to throw in the towel. But the reason why “that development hasn’t really happened” is that “smaller container lines” were unable (thankfully) to follow the crowd by ordering (stupidly) those humungus (and “hogging”) leviathans that ensured the overcapacity “that may take many years” to disappear. And although “the industry has really needed something to happen,” price-fixing isn’t the answer. Jobs, jobs, jobs. That’s the answer.]