Top 5 Carriers to Dominate Container Shipping, Says Drewry

 

In 2015, the top 10 carriers were close to controlling 90 percent of the market. It is conceivable that at some point in the future further concentration will see 90 percent of the Asia-North Europe market being controlled by just five competitors, at which time the carriers will have much greater pricing power than they did in the past.

 

Drewry said in its Container Insight Weekly that in addition to Hanjin Shipping, whose global presence was over, other brands that have effectively disappeared from the upper echelons of carrier rankings this summer included China Shipping Container Lines after its merger with Cosco, while APL and UASC were now merely sub-brands within larger companies after deals with CMA CGM and Hapag-Lloyd respectively.

 

Back in 2005 that share was around 36 percent and while the trend for greater concentration has steadily been rising over the past 10 years it was the recent M&A activity that pushed it past the 50 percent threshold.

 

This trend will continue as the leading five carriers have the largest orderbooks and, as history has shown, the biggest appetite to acquire other carriers. 

 

More carriers will go the way of Hanjin or follow the likes of APL and UASC and take the decision to cash in their chips if the industry continues to be loss making.

 

Ultimately, this will mean less competition for shippers to choose from, but it doesn’t necessarily follow that they will have to contend with higher rates, at least not in the short-term, Drewry said.

 

Economic principles suggest that fewer competitors should mean higher prices or the risk of higher prices, although container freight rates have yet to follow this dictum. As industry concentration intensified freight rates dropped to historical lows. 

 

This has happened for a number of reasons. Firstly, regardless of the number of carriers there were far too many ships on the water and secondly, competition on a trade-by-trade basis remains high, even if it is dwindling. 

 

For example, there were 24 vessel operators available to shippers back in 2006 in the Asia-North Europe market, but as of September 2016 there were still 14 carriers – if  APL and UASC are included as distinct brands.

 

Hanjin Shipping may continue as a regional Intra-Asia carrier if its survival plan is successful, but its days of being a leading global player in the top 20 are over.