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Nov.14, 2016

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4 THE JOURNAL OF COMMERCE www.joc.com Editor's Letter Chris Brooks WH E N H E GETS his f irst face-to- snout glimpse of the man-eating great white shark in "Jaws," Roy Scheider's Martin Brody ut ters one of the most famous lines in fi lmmaking history: "We're going to need a bigger boat." Brody and his crew mates don't get that, of course, and the aptly named "Orca" ends up at the bottom of the Atlantic Ocean. In some ways, it's a metaphor of what's occurring in today's global container shipping industry, though not quite complete: Ocean carriers do need bigger ships; they just need fewer of them — or, more to the point, fewer operators running them. Now, for better and, in some cases, worse, industry interests and analysts who have long called for consolida- tion are getting it. Problem is, they're getting it rapidly and in every way: outright acquisitions (CMA CGM- APL and Hapag-Lloyd/United Arab Shipping Co.), straight-up mergers of like-minded, if competitive, national interests (Cosco-China Shipping and, most recently, "K" Line-MOL-NYK Line), and outright failure (Hanjin Shipping). For shippers, adjusting to this wave of consolidation likewise comes in degrees, all related to the level of disruption it causes. As the analysis on Page 14 explains, disruption from the "K" Line-MOL-NYK merger likely will be minimal because Japan's Big 3 will integrate over the next 18 months, and they already operate in the same alliance. Classify that deal as mildly disruptive. More disruptive are deals that involve cultural integration, and restructuring of alliances and the networks within them. Cosco and China Shipping, members of differ- ent alliances, triggered that wave when they merged in the spring. Classify this form of consolidation as moderately disruptive. And, of course, there is the most severe of consolidation-related disruption: the collapse of a carrier such as Hanjin, whose vessels were still holding shippers' boxes two months after dropping anchor, per- haps for good, on Aug. 31. That Japan's Big 3 are taking a measured approach to their merger stands in contrast to most other container shipping mergers — not to mention the path South Korea took with Hanjin — and sends a strong signal to the market: "We care about execution, and we care about our customers." It's a respect retailers, manufacturers, agricultural interests, and other shippers that are the nerve center of global economic growth say they have lacked for years, whether it be from longshore labor interests, regulators, or service providers. The second, more obvious, signal the Japanese carriers are sending is one of survival. Rather than waiting until a Hanjin-like failure was inevi- table or risking being swallowed by a bigger, non-Japanese company, the carriers, which expect to post combined losses of some $3 billion in their current fi scal year, are con- trolling their fate. Attention now is turning to other carriers in similar shape, scope, and national ties as Japan's Big 3. "All eyes must now surely be on Taiwan, home to three major carriers — Ever- green Marine Corp., Yang Ming Line and Wan Hai Lines," Anton Alifandi, a political risk analyst at IHS Coun- try Risk (a sister division of The Journal of Commerce within IHS Markit), wrote in a research note the day after the Japanese carriers announced their merger. Taiwan and other countries with shipping interests could learn from the Japanese strategy, as well as from the words of NYK Line President Tadaaki Naito during a joint press conference announcing the merger: "The aim of becoming one this time is so none of us become zero." It's not, after all, the size of the boat. It's what you have on it. JOC Shipping's Feeding Frenzy The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, November 14, 2016, Volume 17, Issue No. 23. The Journal of Commerce is published bi-weekly except the last week in December (printed 26 times per year) by JOC Group Inc. 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105. Subscription price: $595 a year. Periodicals postage paid at Newark, N.J., and additional mailing offi ces. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, 2 Penn Plaza East, Floor 12, Newark, N.J. 07105-2257. NOVEMBER 14.2016 EXECUTIVE EDITOR, THE JOURNAL OF COMMERCE AND JOC EVENTS Chris Brooks 973 776 7818 chris.brooks@ihsmarkit.com MANAGING EDITOR Barbara Wyker 973 776 7817 barbara.wyker@ihsmarkit.com EXECUTIVE EDITOR, JOC.COM Mark Szakonyi 202 872 1234 mark.szakonyi@ihsmarkit.com SENIOR EDITORS Joseph Bonney, Breakbulk/Project Cargo, Gulf Coast 973 508 2417 joseph.bonney@ihsmarkit.com William B. Cassidy, Trucking and Domestic Transportation 202 872 1228 bill.cassidy@ihsmarkit.com Bill Mongelluzzo, West Coast 562 428 5999 bill.mongelluzzo@ihsmarkit.com Hugh Morley, Northeast, Mexico 973 776 7811 hugh.morley@ihsmarkit.com Greg Knowler, Asia Editor, IHS Maritime & Trade +852 3975 2647 greg.knowler@ihsmarkit.com Turloch Mooney, Global Ports, IHS Maritime & Trade +852 9011 9109 turloch.mooney@ihsmarkit.com ASSOCIATE EDITOR Reynolds Hutchins, Intermodal, Government/Regulation, Southeast Ports 202 572 1487 reynolds.hutchins@ihsmarkit.com RESEARCH EDITOR Marsha Salisbury 973 776 7828 marsha.salisbury@ihsmarkit.com ASSISTANT WEB EDITOR Dustin Braden 973 776 8652 dustin.braden@ihsmarkit.com SENIOR ECONOMIST, IHS MARITIME & TRADE Mario O. Moreno 973 776 7850 mario.moreno@ihsmarkit.com SENIOR CONTENT EDITOR Alessandra Gregory Barrett 860 248 5238 alessandra.barrett@ihsmarkit.com SENIOR DESIGNER Sue Abt, 973 776 7825 sue.abt@ihsmarkit.com DESIGNER Bryan Boyd, 973 776 7827 bryan.boyd@ihsmarkit.com PUBLISHER Tony Stein 770 295 8809, tony.stein@ihsmarkit.com SALES Cindy Cronin, Strategic Account Manager Southeast, Gulf, Canada sales, 954 551 8305 Zachary Gorman, Account Executive Northeast sales, Classifi eds/Reprints/Copyrights 973 776 7820 Misty Belser, Senior Sales Executive 919 869 7404 Ria Van den Bogaert, Sales Representative Europe, Middle East sales, +32 2 569 8905 Bon Kwok, Sales Representative Asia sales, +852 31707373 For Magazine Subscription Customer Service: www.joc.com/help 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105 973 776 8660 • 800 952 3839 MANAGING DIRECTOR, MEDIA AND EVENTS, IHS MARITIME & TRADE, Rhiannon James SENIOR DIRECTOR, CONTENT, IHS MARITIME & TRADE, Peter Tirschwell DIRECTOR, JOC AND RAILRESOURCE, IHS MARITIME & TRADE, Amy Middlebrook MANAGER, PRODUCTION, Carmen Verenna MARKETING PROGRAMS MANAGER, PIERS AND JOC, Jesse Case ©2016 The Journal of Commerce — All Rights Reserved For more information, visit our website, www.joc.com.

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