China flexes its shipping muscles: The Nation columnist

Containers from China Ocean Shipping Company (COSCO) pictured at a port in Shanghai, China, February 17.
Containers from China Ocean Shipping Company (COSCO) pictured at a port in Shanghai, China, February 17. PHOTO: REUTERS

Suwatchai Songwanich 
The Nation/Asia News Network 

It has been an extremely tough year in the shipping industry, which has been experiencing its worst slump in decades. 

However, China has once again turned crisis into opportunity and through a series of clever moves has become the leading global player.

Last year the Chinese government initiated a merger between China's two loss-making shipping companies, COSCO and China Shipping. 

The result, launched this year under the catchy name of COSCOCS, is the largest shipping line in the world. 

COSCOCS then initiated the mega-Ocean Alliance with three other shipping giants - CMA CGM from France, which has just taken over Singapore's Neptune Orient Lines (NOL), Taiwan's Evergreen Line, and Hong Kong's Orient Container Line. 

Pending approval from regulators, Ocean Alliance should start operations in April 2017.

Assuming everything proceeds according to plan, global shipping will be dominated by three major groups: the Ocean Alliance, 2M (Maersk Line and Mediterranean Shipping) and G6 (Hapag-Lloyd, Hyundai Merchant Marine, MOL and Nippon Yusen Kaisha.) 

In order to compete, other shipping countries will have to form their own alliances or join one of the big three.

The Ocean Alliance, with around 350 ships, will have the largest market share on the world's two busiest routes - approximately 34.5 per cent on Asia-Europe routes, compared with 33.4 per cent for 2M and 38.9 per cent on Asia-North America routes, compared with 15.6 per cent for 2M. 

The consolidations have been driven by the crisis in the shipping industry, which has been hammered by a downturn in global trade. 

Maritime consultancy Drewry forecasts that the global container shipping industry will make a combined loss of US$5 billion (S$ 6.79 billion) this year, due to extremely low freight rates and cargo volumes, idle ships and higher operating costs. 

To respond to these problems, carriers will need to seek operational savings and optimise their fleets by using larger, more efficient ships. 

Clearly this will have an impact on ports, including those in Thailand. 

There is bound to be increased pressure from the big players to cut costs on the handling of cargo and major ports will also need to accommodate larger ships. 

As the 23rd largest container port in the world, Thailand's Laem Chabang will certainly need to keep up with these developments. Fortunately, it is already being upgraded to enable the handling of up to 3 million containers and to accommodate large cargo ships, and freight-handling capacity will also be increased. 

Boosting Thailand's competitiveness will become more necessary than ever, given the dramatic changes taking place in the industry. 

The writer is CEO of the Bangkok Bank (China).