Fertile ground for mergers and acquisitions

Against a background of
predicted global trade growth
of 4.5% over the next five years,
local analysts and industry
stakeholders expect further
consolidation in the shipping
industry as companies seek to
survive the worst slump since
World War 2.
“The slowdown in global
growth and trade volumes
would obviously heighten
competition within the
shipping industry as operators
fight for an all but stagnant
pie or one that is certainly not
showing the growth rates it
has seen previously. This can
also be seen in the low levels of
the Baltic Dry Index in recent
times,” Credit Guarantee
Insurance Corporation senior
economist Luke Doig said.
Major moves to consolidate
in the shipping industry have
been seen recently with the
likes of DSV’s acquisition of
UTi, for example.
Freightliner Transport CEO
Kevin Martin said business had
been flat for the past 18 months
as on-shoring took effect.
“The US is starting to
bring manufacturing plants
back to their
neighbouring
countries
and the EU
is bringing
them back
to countries
like Georgia,
Czech Republic
and Slovakia
where they
have cheaper
labour and the
logistics chain
is shortened. That means we
are not getting the same types
of cargo moving from China
to the US and that is going to
impact on us,” he said.
“There is no business
confidence out there and the
numbers are not changing from
one month to the next.”
Deutsche Afrika-Linien
(DAL) managing director Ron
Frick said he did not expect
local trade to improve due to
low investor confidence in the
country because of the political
climate.
“Growth is not expected to
pick up because the government
is giving the
mining industry
and investors
no confidence.
BEE policies
frighten off
foreign investors
and there are
better options
elsewhere in the
BRICS countries
to invest. A lot
of SA companies
are using their
spare cash to invest elsewhere
in Africa and abroad,” he said
“The shipping industry
is going through one of the
deepest crises since World War
2. The shipping industry has
been building ships to achieve
economies of scale but the
whole reason for the big ships is
no longer validated,” he said.
“They have all the capacity
but don’t have the cargo to fill it
so mergers and acquisitions are
a reality going forward because
trade levels have dropped,” he
said.
Frick added that companies
would continue to downscale
and more would use
documentation processing
centres in India and the
Philippines where labour was
cheaper.
He said SA’s automobile
sales, a strong indicator of the
health of the economy, had
declined 0.3% year on year
in August according to the
latest National Association of
Automobile Manufacturers of
South Africa figures.
University of Stellenbosch
head of the Centre for Supply
Chain Management, Jan
Havenga, said all industries
were impacted by slow growth.
“Industries all adjust
to changing times by
consolidation. It creates
economies of scale and allows
synergies to be monetised.
This has happened in
South Africa in banking,
processed food production,
transport companies, mining,
everywhere,” he said.
INSERT & CAPTION
The shipping industry
is going through one
of the deepest crises
since World War 2.
– Ron Frick