Was a long-term curse unleashed on US container lines when Malcolm McLean loaded those first boxes all those years ago? The superstitious might be prone to believe so, judging by an analysis by Drewry of the lasting effects of APL’s absorption into NOL.
The last echo of the Big Bang in US and world shipping, detonated by McLean, APL has been the mainstay of NOL for many years and is the last reminder of the nation’s once mighty fleet. (Domestic US lines are irrelevant because they are so small and operate in a contrived market.) Drewry, to put its analysis in a nutshell, reckons APL is a drag on the group – compared to a carrier such as OOCL. “…NOL’s liner division has had a rigid cost structure, in part a legacy of company’s acquisition of APL, forcing the company to post consecutive losses. NOL’s high fixed costs are driven by greater ship operating expenses, sub optimal vessel size and higher operating lease commitments. The difference in costs between the two is the prime differentiator which translates into higher yields for the former and poor returns for the latter.” (The two carriers are compared because they have been through similar turbulent times and are of similar size.)
On the Asia-North America lane, average APL vessel sizes are only 2 percent above the industry average of just over 6,000 TEU, while OOCL is 20 percent greater, according to Drewry. (Jones Act carrier Matson is 56 percent BELOW the industry average.) “NOL’s asset base has historically been focused on charter-in tonnage leading to higher unit costs. Despite NOL’s current focus on fleet restructuring, wherein it is expanding its owned fleet and returning expensive chartered-in vessels, its fleet mix is still skewed in favor of chartered vessels in the ratio of sixty to forty.” OOCL, through its parent OOIL, has a fleet “evenly distributed between owned and chartered vessels giving it necessary flexibility in better managing its
The result has been that OOCL has posted much better results since the crash of 2008, losing much less than its competitor in bad years and earning much more in good years.
And, all around the industry, consolidation is being pushed. According to Fitch Ratings,” Recent developments, including the proposed merger of Hapag-Lloyd and CSAV, US regulatory approval of the P3 Network, and the expansion of the CKYH alliance to include Evergreen will all add to the pressure on smaller operators to consolidate.”