As part of the continuous consolidation trend in the container shipping industry, France’s CMA CGM, which is currently the third biggest container line, has reportedly made an exploratory approach to German Hapag-Lloyd, the world’s fifth line, over a possible form of merger, Reuters reported.
The news is not confirmed and more details are yet to be revealed. A Reuters source suggested that the French giant has initiated discussions with the German company over the issue in recent months, regarding a proposal of a non-cash merger, but Hapag-Lloyd stakeholders do not seem positive on a potential integration at the moment.
However, in June, Hapag-Lloyd slashed its profit forecast for the year, claiming a slow recovery of freight rates and higher fuel and charter costs. In addition to this, the current situation as erupted from the escalated US-China commercial war has created an overall cost uncertainty in global shipping trade.
At the same time, CMA CGM has been looking for ways to strengthen market presence and cut costs, after its acquisition of Singapore-based line APL in 2016.
The news comes about half a year after Hapag-Lloyd completed merger with United Arab Shipping Company (UASC), becoming the world’s fifth-largest liner shipping company.
Although both firms have made acquisitions, a merger could help them compete better on key global trade routes, Reuters reports. Currently, Hapag is strong on routes between Europe and the Americas and in the Middle East, while CMA CGM has scale in Asia.
A possible integration of the two businesses would also significantly ‘narrow the gap’ from the world’s leading container shipping player, Danish Maersk.
The shipping business integration strategy has been seen a lot in the last couple years, as a result from global economic downturn, leading shipping companies to mergers or alliances, in order to achieve stable profits, overtake the competition, and encounter with the oversupply of vessels.
Another landmark move for international container shipping was Maersk’s acquisition of Hamburg Sud in late 2017.
