Freight Transport

In an arrangement that is hardly explicit, two of the world's largest container shipping lines appear to have agreed to merge their businesses, at least at some undefined point in the future.

CMA-CGM and Mediterranean Shipping Company (MSC) yesterday (December 1, 2011) signed what they both call "a major agreement" in what are very brief and not very detailed statements. The MSC announcement says that the two companies have "agreed to form a broad-based operating partnership spanning several trades, including Asia-Northern Europe, Asia-Southern Africa and all of the South American markets." The statement continues, "…the agreement, which is designed to improve the two partners' respective performance, will help to drive extensive operating synergies and enhance quality of service for all of their customers. On a certain number of trades, the partnership will also enable the Groups to deploy the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailings."

This would suggest that the "agreement" is simply operational in nature and will not involve the merger of the two companies. However, further on in the press release Diego Aponte, Vice President of MSC, is quoted as saying the partnership will "unite our two family-owned companies in the years ahead." This would suggest a merger.

MSC and CMA-CGM are respectively the second and third largest container shipping companies by capacity. Combined they would operate an estimated 21% of the actual and ordered world's fleet in terms of TEUs (twenty-foot container equivalent units). This would surpass Maersk which is presently the largest company with around 15% of container shipping capacity.

Yet it would be unwise to jump to any conclusions just yet. Yes CMA-CGM is suffering financially in the present market conditions, as are many shipping lines. However, both companies are dominated by their founding families and this may present significant difficulties for any proposed merger. The Saade family has been tenacious in its grip on CMA-CGM through the troubles of the past year, whilst the Aponte family, which is believed to own most of the very secretive Swiss based MSC, is equally dominant in their company. Reconciling the two might present integration problems.

The deal is being hailed as evidence of consolidation in the container shipping sector driven by falling freight rates and Maersk's ambition. However, more detail is needed on the nature of the agreement to assess its true meaning and its real potential.

Content provided in partnership with Transport Intelligence.