Alliances, Mergers and Acquisitions in the Shipping Sector

A special issue of International Journal of Financial Studies (ISSN 2227-7072).

Deadline for manuscript submissions: closed (30 November 2017) | Viewed by 10172

Special Issue Editor


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Guest Editor
Australian Maritime College, University of Tasmania, Tasmania, Australia
Interests: maritime economics; port economics; port and shipping policy

Special Issue Information

Dear Colleagues,

The global financial crisis of 2008 led to a reduction of seaborne trade and ship freight rates. The container industry, once more, is found in an environment that brings forward a new wave of market consolidation. Some companies adopt an acquisition strategy whereas others follow the path of formatting new alliances. The reasoning behind the differentiation of strategies is not clear and needs to be explored from a strategic, financial and policy aspect.

The consolidation in the industry is the result of every period of downturn in the global trade. However, a significant differentiating factor is identified today. It is debatable whether in an era of continuous expansion of average ship size the consolidation will indeed provide the sought financial benefits for the participants while market concentration could decrease competition without achieving a higher level of technical efficiency.

The consolidation in the container ship market affects also the logistics chains and primarily port investment and financing. With a concentration of market power on the side of shipping alliances, ports find themselves in a position where increased investments are called for in order to achieve efficiency and productivity that will attract a smaller number of potential clients. At the same time port investments are faced with increased risk and uncertainty due to the market consolidation on the demand side. This calls for new tools of investment evaluation and could potentially lead to new forms of port financing.

Market consolidation will undoubtedly increase due to the new alliances formed and the mergers taking place. However, policy institutions most likely address the clearance process through tools that might not be applicable in the new structures proposed. Although the process for mergers and the tools utilized are now well defined, it is arguable whether the same can be applied in structures that do not consolidate market share but focus on agreements of space and time sharing that cannot be measured with the traditional concentration indices. Literature on this topic is completely lacking and needs to be developed.  

In addition, the literature on shipping alliances is mainly focused on the impact of alliances on trade and operational efficiency. However, most of the literature has been developed during the early 2000, where the global port networks and financial tools were completely different. In the era of global port operators that form part of groups that include container shipping companies the effects of acquisitions, market consolidation and competition between supply chains is not adequately researched.

The Special Issue seeks to address the above questions and primarily calls for contributions that will shed light on the impact of the new shipping market structure for ports, financial institutions and investment decisions. It also seeks to revisit the process of approvals of mergers and alliances from the policy bodies of the EU and US.

Prof. Thanasis Karlis
Guest Editor

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Keywords

  • shipping alliances,
  • mergers and acquisitions,
  • market concentration,
  • economies of scale,
  • port marketing,
  • policy application

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Published Papers (2 papers)

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Research

21 pages, 9110 KiB  
Article
“After End-2008 Structural Changes in Containership Market” and Their Impact on Industry’s Policy
by Alexandros M. Goulielmos
Int. J. Financial Stud. 2018, 6(4), 90; https://doi.org/10.3390/ijfs6040090 - 1 Nov 2018
Cited by 1 | Viewed by 3178
Abstract
The inability of carriers to forecast “demand for containerships” led them to order larger ships. Maritime economists were also unable to forecast it. The new-buildings cut cost per TEU, but “estimated economies of scale” are exhausted with ships beyond 21,000 TEUs, higher than [...] Read more.
The inability of carriers to forecast “demand for containerships” led them to order larger ships. Maritime economists were also unable to forecast it. The new-buildings cut cost per TEU, but “estimated economies of scale” are exhausted with ships beyond 21,000 TEUs, higher than the present. As average cost-AC was not at minimum, carriers did not produce at minimum efficient scale (MES). As larger ships are more competitive, smaller ships led to laid-up, and eventually scrapped. This strategy, however, did not bring the desirable balance between demand and supply. Due to falling demand, following the meltdown at the end of 2008, carriers priced their services at marginal cost-MC, and thus they accumulated losses. As a result, carriers resorted to frequent GRIs (freight rate increases). Supply exceeded demand and average distances fell after 2008. Containership market will remain depressed if economies of scale lead carriers to shipyards. Scrapping—the last hope—removed only 1/7 of the oversupply. Revenue, operating profits, and net profits, due to increased financial expenses, were lower than in the past. Aggressive ship-building programs could not be carried-out, because the depression meant that there are available only limited funds. The estimated funds required for new buildings were as high as $4 billion per carrier. So, the sector is in a vicious circle. The only helpful sign was the reduction in fuel prices after 2011 from $800/ton to $278 (2015). We also showed that ports and canals, through their traditional charging policy on size, penalized containerships for their efficiency—if volume discounts are not provided. Port dues and container handling and canal dues account for as much as 40% of the annualized containership cost. Finally, to study the relationship between concentration (market share) and revenue, operating profit and net profit, we ran three regressions; but only one gave a high correlation coefficient (0.97). This suggests that the containership market is purely competitive. We also showed that the Herfindahl index was 683 units (i.e., <1000) and Lerner’s index was 0.55—both indicating oligopolistic trends. Our model shows that containership market is either oligopolistic or purely competitive. This finding shows the double face of containership markets, which so much confused maritime economists. Full article
(This article belongs to the Special Issue Alliances, Mergers and Acquisitions in the Shipping Sector)
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19 pages, 296 KiB  
Article
A Critical Review of the Literature on Firm-Level Theories on Ship Investment
by Sinem Celik Girgin, Thanasis Karlis and Hong-Oanh Nguyen
Int. J. Financial Stud. 2018, 6(1), 11; https://doi.org/10.3390/ijfs6010011 - 19 Jan 2018
Cited by 16 | Viewed by 6523
Abstract
The maritime industry is one of those rare industries that are both highly international integrated to international trade and also highly capital intensive dependent on substantial investment amount. In the literature, ship investments have not been widely examined through the firm-level investment theories [...] Read more.
The maritime industry is one of those rare industries that are both highly international integrated to international trade and also highly capital intensive dependent on substantial investment amount. In the literature, ship investments have not been widely examined through the firm-level investment theories to explore the link between investment level and asset price valuation. The general trend in the literature of ship investments is to analyse the relationship among the shipping markets (newbuilding, second-hand, freight rate and scrap) and their impact on asset price valuation, the timing of investments and market entry and exit conditions. In this paper, we extensively reviewed the literature of firm-level investment theories and ship investments. We showed that the application of firm-level investment theories to the ship investments is confined to the basic investment valuation models, such as Net Present Value and Real Option Analysis. Ship investments need to be examined by firm-level investment theories to define firm/industry value maximization level within the approach of the solid investment theories. Full article
(This article belongs to the Special Issue Alliances, Mergers and Acquisitions in the Shipping Sector)
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