By Andy Hoffman

(Bloomberg) — Global container transport traces face one or two extra years of ache because the trade consolidates amid overcapacity and weaker demand, in response to the Port of Long Beach’s chief government officer.

Cheap credit score and low gasoline costs are propping up weak gamers and delaying the mergers and alliances wanted to resolve the disaster, Jon Slangerup, CEO of Long Beach, the second-busiest U.S. port, mentioned in an interview in Geneva.

“There are going to be some lingering weak players and it will take some time to sort out,” Slangerup mentioned, after assembly transport purchasers in Copenhagen, Hamburg and Geneva. “It will be a year or two. A year for some, two for others.”

Slowing demand in China and Europe mixed with a glut of container ships has pushed down freight costs, with Drewry Maritime Equity Research final month projecting trade losses of $6 billion in 2016. Long Beach is being damage by the fallout as cargo volumes slumped 22 % in April after CMA CGM SA shifted some enterprise to neighboring Los Angeles, the busiest U.S. port, following its acquisition of Singapore’s Neptune Orient Lines Ltd.

“Even though we had a very good first quarter and we had a very good last year, our second quarter will be very weak,” mentioned Slangerup. “We are in the middle of all this musical chairs so volumes are shifting dynamically as we speak.”

Future Alliances

Volumes on the port, which derives greater than 90 % of its enterprise from commerce with Asia, ought to normalize within the third quarter, he mentioned. Cargo elevated 6.1 % within the first quarter, following a 5.4 % acquire in 2015.

As rates of interest and gasoline costs rise, mergers and alliances designed to chop prices by sharing ships ought to proliferate, mentioned Slangerup, a former FedEx Corp. government.

An alliance between the world’s two largest container transport traces, A.P. Moeller-Maersk A/S of Copenhagen and Mediterranean Shipping Co. of Geneva, represents the “gold standard” for the trade, Slangerup mentioned. In April, CMA CGM signed a preliminary settlement with three different transport traces to kind what might be the second-ranked grouping, the Ocean Alliance.

Hapag-Lloyd AG, Germany’s prime container transport line, and 5 Asian carriers mentioned this month they are going to kind a brand new vessel-sharing alliance to tackle larger rivals. The grouping consists of South Korea’s Hanjin Shipping Co., whose shares have declined 50 % this 12 months.

Further Consolidation

Slangerup mentioned there might be additional consolidation within the South Korean transport trade as Hanjin and Hyundai Merchant Marine Co., which is working with collectors to restructure its debt, are each struggling.

“The South Koreans are in trouble,” Slangerup mentioned. “They are competitors but it would not surprise me if they were forced to join together as one.”

The port hopes to function a “facilitator of change” to deliver collectively purchasers in alliances and mergers that may enable them to share not solely ships but additionally details about container freight demand and availability, Slangerup mentioned.

“Pain is a great teacher,” he mentioned. “It has really begun to bring people together in ways that it hasn’t done in the past.”

–With help from Christian Wienberg.

© 2016 Bloomberg L.P