Archives for posts with tag: containership operators

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.

SIW1259

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SIW1155In the famous novel a young Oliver Twist pleads in vain with Mr Bumble at the workhouse “Please Sir, I Want Some More”. In early 2014, containership owners would have been looking for the opposite of the young Oliver – anything but more of the prevailing conditions. Yet once again challenging markets prevailed, and by the end of the year boxship players had probably “had enough”.

Anything But More

After five years in the doldrums, 2014 was essentially more of the same for the liner sector. With the global economic downturn having cut harder into demand in the box sector than almost anywhere else, half a decade on and containership operators were still found wrestling with the need to find ways to absorb potentially surplus capacity. The fully cellular containership fleet expanded by around 6% to 18.2m TEU in full year 2014, and trade growth in the same ballpark was not enough to push the market balance back into a more positive direction.

Fed Up Yet?

Box freight market conditions remained extremely volatile with liner companies in an ongoing battle to manage incoming capacity. Average spot freight rates for the year were up a little (7%) on the Far East-Europe route but down a little (3%) on the Transpacific. Few liner companies (except the market leader) made substantial profits, although towards the end of the year falling bunker prices at least started to reduce liner company costs.

If anything, the story was even worse on the charter market. Earnings remained depressed for yet another year, with only limited gains on historically low levels. Cascading of capacity from the mainlanes, allied to idle capacity, kept the pressure on charter owners, although later in the year there was some relief in the Panamax sector where unexpectedly robust redeployment onto intra-regional trades and a declining fleet provided more substantial support for rate levels than in other size sectors. Panamaxes also bucked the trend against generally falling asset prices in the boxship sector, with end year 10 year old secondhand prices up over 20% on end 2013 levels.

Ready For A New Twist?

So, if everyone has “had enough” and can’t take any “more”, what might change? Well, the industry consensus suggest things are getting a little tighter now. Plenty of capacity has been absorbed by slow steaming (with no sign yet of lower bunker prices changing things, though this needs to be watched carefully), much less capacity is idle (around 1.3% of the total fleet today) than in previous winters and the orderbook looks much more manageable at 18% of the fleet. Demolition remains historically high, with 0.4m TEU scrapped in 2014. Meanwhile, port congestion, most obviously on the US West Coast, may start to soak up significant amounts of capacity.

More And More

This might be enough to convince some investors that there’s no more (pain) to come and it’s time for a change in fortunes. But at the same time, liner companies still have plenty of big ships scheduled for delivery (and look set for another spending spree, placing orders for a new wave of ships of 20,000 TEU and above). Whatever the view of the optimists, extra capacity to be added, allied to economic headwinds in a number of parts of the world, will certainly pose challenges for the sector. Containership market players will have to artfully dodge the obstacles if they don’t want to be asking why they have had more of the same this time next year. Wish them luck. Have a nice day.