Archives for posts with tag: consolidation

Last year saw a huge amount of change in the under pressure container shipping sector. In particular, the ongoing consolidation of the sector in one form or another grabbed the headlines. To put this into context, it’s interesting to see how the level of consolidation relates to other parts of shipping, how it has developed over time and how it might progress looking forward.

Solid In A Fragmented Field

It’s quite clear that the shipping industry is a fairly fragmented business. On the basis of start 2017 Clarksons Research data, 88,892 ships in the world fleet were spread across 24,267 owners. That works out at less than 4 vessels per owner. Although 145 owners with more than 50 ships accounted for almost 12,000 of the vessels (and 29% of the GT), it’s still not that consolidated. The liner shipping business however is one the more consolidated parts of shipping, as well as being home to some of the industry’s larger corporates. At the start of the year, the 5,154 containerships in the fleet were owned by 622 owner groups, about 8 ships per owner, but, perhaps more pertinently, were operated by 326 carriers, about 16 ships per operator. Each of the top 8 operators deployed more than 100 ships. But despite the less fragmented nature of the sector, recent market conditions have led to another round of consolidation in the box business.

All Change At The Big End

The three largest operators (by deployed capacity) at the start of 2017 were European: Maersk Line (647 vessels deployed) followed by MSC (453) and CMA-CGM (454). Of the remaining carriers in the top 20 all but three were based in Asia or the Middle East. However, what’s really interesting is that out of the 20 largest carriers back in late 2014, 4 are now gone. CSAV was acquired by Hapag-Lloyd, NOL/APL by CMA-CGM and the two major Chinese lines merged. And of course in late summer 2016, the financial collapse of Hanjin Shipping marked the sector’s biggest casualty in 30 years.

Long-Term Liner Trends

Against this backdrop, the graph shows  that the latest wave of box sector consolidation is actually part of a long-term trend. Back in 1996 the top 10 carriers deployed 45% of capacity and at the start of 2017 that figure stood at 70%. The coming year is set to see Hapag-Lloyd complete its merger with UASC, and Maersk Line’s planned acquisition of Hamburg-Sud is also awaiting necessary approvals. The second half of last year also saw the three major Japanese operators declare their intention to merge containership operations in a joint venture due to be established this year and start operations in 2018. The ‘scenario’ based on these changes would see the top 10’s share at 79%, nearly twice as much as 20 years ago.

Tracking The Top Table

So, the container sector is one of the more consolidated parts of shipping, and both the long-term trend and recent developments point towards ongoing consolidation. Many hope this will help the recalibration of market fundamentals and eventually support improved conditions. In the meantime, we’ll be publishing the ranking of the top containership operators every month, so watch this space.

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Last week’s Analysis highlighted the rejection of the ‘P3’ container shipping alliance plans by the Chinese authorities, and how it might relate to the movement of trade by national fleets or otherwise. This week the focus is shifted to examine how liner shipping, ‘P3’ or no ‘P3’, fits within the pattern of consolidation in the key volume shipping sectors.

How Does It Stack Up?

In reality shipping is a relatively fragmented business. Over 88,000 vessels constitute the world fleet across almost 24,000 shipowners, with an average of less than 4 ships per owner. Limiting the analysis to 10,000 dwt and above, the average is still less than 7 ships. When talk of the ‘P3’ first hit the container shipping news, concerns were raised about the potential level of consolidation in shipping. Does that really stack up?

In Bulk, But Not Consolidated

As the graph shows, there has been consolidation of ownership, but over the last 20 years it has actually been fairly gradual. Today the Top 20 tanker owners account for 30% of the tanker fleet compared to 26% in 1994. In the bulker sector the Top 20 owners account for 22% today compared to 15% twenty years ago. In general, larger entities such as industrials have increased their share of the bulk fleets. Both sectors saw a fair amount of consolidation between 1994 and 2004, before a drop in the share accounted for by the Top 20 owners since then. The downturn post-2008 looks to have led to some fragmentation as the distressed position many traditional owners found themselves in created opportunities for new entrants (and new money).

Ticking The Boxes?

Containership ownership, meanwhile, has always been dominated by large, fairly corporate, ‘liner’ companies and some substantial charter owner interests. With ‘strings’ of containerships needed to operate scheduled services, ownership has been consolidated amongst fewer entities, and in 1994 and 2014 the Top 20 owners accounted for just under 60% of overall capacity, a much higher share than in the bulk sectors.

Concentrated Liners

However, liner operation (rather than boxship ownership) is where volume shipping is most highly consolidated. Large liner companies have historically been afforded some protection, first by the conference system and then by the approval of a network of alliances, reflecting the capital intensive nature of running box shipping services and the associated infrastructure. Today the Top 20 lines operate 77% of container capable capacity globally, up from 66% in 2004 and 37% in 1994. This is clearly a highly consolidated part of shipping, ‘P3’ or no ‘P3’ (itself a proposed alliance, not a merger of operators).

Overall, shipping remains quite fragmented despite some gradual consolidation. However, liner shipping, with its heavy operational demands, is generally much more concentrated. It’s certainly not quite Coca-Cola and Pepsi, but even without the ‘P3’ alliance this is where volume shipping is by some distance already at its most consolidated. Have a nice day.

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