Mergers & Acquisitions Push Shipbuilding Industry into Recession

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The shipbuilding companies are facing the burden of recession since there are no new orders being placed for building shipping vessels.  The industry is facing a glitch because of oversupply market conditions.  It has been reported that these days the Global shipping operators are focussed on mergers and acquisitions rather than placing an order for new ships.  Examples include M&A between various International shipping industries the largest being AP Moller-Maersk, second-largest CMA CGM and sixth-largest Hapag-Lloyd respectively.

The number of orders for building new ships has already dropped from 91 (1.614 million TEU) in 2015 to a mere total of 5 ships (70,000 TEU) until the month of September in 2016.

According to Clarkson research report, the International shipping container demand and supply dropped from 89 to 80.7 between 2011 and last year.  In the global index, 100 is the point of balance and a value attained lower than that means that the ship supply exceeds the total freight volume.

An industry source added, In the case of a deterioration of financial structures of shipping companies, shippers will refuse to load cargoes and terminals and loading and unloading companies will refuse to provide their services,”.  He further added, “In the wake of the receivership of Hanjin Shipping, the global shipping industry is likely to be reorganized by industry leaders and, as such, growth strategies concentrating on M&A is inevitable”.

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Source: BusinessKorea

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