Archives for posts with tag: container shipping market

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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In today’s container shipping market, the presence of a group of ‘charter owners’ who account for a significant part of the fleet is an accepted part of the landscape. But this has not always been the case; it has taken a number of phases of investment to bolster the capacity of this important part of the boxship ownership spectrum, and in today’s environment it’s worth taking a closer look at the past.

An Equal Share

Container ‘liner’ operators deploy tonnage owned by themselves and also capacity provided by independent ‘charter owners’. In today’s fleet there are 5,126 boxships, and charter owners account for 2,722 of them, equivalent to 53% of the units and 48% of the TEU capacity. However, this wasn’t always the case. Back in the early 90s the liner companies owned 75% or more of the capacity, and the charter market was embryonic.

Phases One & Two

A key driver of change was increased investment in boxships in Germany backed by the ‘KG’ finance system, allowing ship owners and managers to access private investment, offering investors a tax break in the form of accelerated depreciation in return. 285 charter owned ships in today’s fleet were built in 1996-98 (Phase 1), 139 (49%) of them owned by German companies. By 1999 charter owners accounted for 35% of global TEU. Though the benefits of the KG system were eventually limited to tonnage tax gains, the early 2000s saw renewed German investment. Of today’s charter-owner fleet, 700 units were built in 2000-05 (Phase 2), 424 (61%) owned by Germans. This took the charter owner share of TEU to 47% by 2006. Some Greek and Japanese owners had also become established but Germans led the way.

Fast Then Slow

Phase 3 followed. During the great ordering boom, German owners invested even more heavily, swept along by positive sentiment and earnings, as well as the availability of ‘easy’ finance. Of today’s charter owner fleet, 1,113 units were delivered 2006-10, 701 (63%) of them German owned. By 2011, 51% of global TEU was charter owned. But with the credit crunch in 2008, the KG system collapsed and charter owner ordering slowed.

Time For New Phases?

Of today’s charter owner fleet, just 402 units were built in 2011 or since (Phase 4), with only 178 of them German owned (44%). The charter owner share of TEU began to fall. Although others entered the charter owner arena, including Greeks, Chinese and ‘new’ shipping money, nothing as yet has quite replaced the volumes provided by the Germans. Charter owners account for 68% of capacity on order today, but the average number of charter owner ships built in the last 5 years is half the number built in the previous 10.

So, with steady demand growth a reasonable bet, and an apparent gap in the investment profile, market watchers await to see who might step forward. Despite operators focussing their firepower on very large ships, today’s orderbook stands at a relatively modest 18% of the fleet. For investors looking to become a fixture, might boxship charter ownership offer opportunities for new phases?

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