The global container market is poised to consolidate in the next few
years as AP Moller Maersk and other major shippers roll out bigger
vessels, potentially forcing smaller rivals to drop out of an
already oversupplied market.
container firms warn that a move by the majors to flood the market
with mega ships could spark a “rate war” similar to 2009 when
the market plummeted and most firms fell into the red in one of the
industry’s worst downturns.
believe that ... the largest shipping companies will continue to
expand the scale of economies of the industry,” said Thomas
Knudsen, Maersk Line’s chief executive for Asia-Pacific region, at
an industry conference in Singapore. “As we drive these scales of
economy, it will be difficult for the smaller carriers in these
industries to compete. That will drive consolidation.”
the world’s top container shipper which holds a 15% share of the
container market, is expanding its fleet by around 8% annually to
keep up with economic growth.
are not doing this aiming at taking market share,” Maersk chief
executive Nils Andersen told reporters at an industry event. He
agreed that consolidation would be the most likely outcome.
leaders in the container markets have placed multi-billion dollar
orders for the world’s biggest vessels to meet growing demand in
Europe and the United States for Chinese manufactured goods.
in February ordered 10 of the world’s largest container ships for
US$1.9bil and took options on 20 more vessels of a similar size to
capitalise on expected growth on the benchmark Asia-Europe route.
for delivery from 2013, Maersk’s 18,000 twenty-foot equivalent
unit (TEU) container vessels would surpass the current largest box
ship of 15,000 TEUs, also owned by the company. Switzerland-based
Mediterranean Shipping Company and French privately held CMA-CGM,
which are the next two biggest container shippers after Maersk, are
also looking to expand their fleet with ships above 10,000 TEUs,
according to analysts.
50 mega container ships with 10,000 TEU capacity or more are
expected to be delivered this year, making up nearly half of the
total new capacity of 1.35 million TEUs due for 2011, according to
the leading industry consultancy group Alphaliner. The orderbook
showed 59 mega ships for 2012.
is better if you can fill the ship,” said Randy Chen, special
assistant to the president at Taiwan-based Wan Hai Lines . “If
your ships are not full, you need to put the vessels away for the
short period of time to make sure the revenue covers the costs.”
major shippers were unlikely to idle new ships, placing the burden
of plummeting freight rates on smaller rivals. Spot rates on the
Asia-Europe container route have tumbled by about half in the last
nine months, trading last week at around US$978 per TEU from more
than US$1,800 in July 2010. Although the market was expected to
rebound slightly in the second half, the battle for survival has
already become too difficult for some container firms.
The Containership Company has announced it will suspend its
container shipping operations on poor cargo volumes and excessive
competition, industry group Alphaliner said. Others are poised to
container shipper Horizon Lines warned last month it could also be
forced to seek bankruptcy protection for not being able to comply
with its debt agreements.
container ships, a lot of companies are not making money right
now,” said Janet Lewis, shipping analyst at Macquarie Securities,
adding that Chilean CSAV was also under pressure.
month, Standard & Poor’s cut its outlook on CSAV’s corporate
credit rating to “negative” from “positive” to reflect its
view of the container shipping company’s weak business risk
profile and aggressive financial risk profile.
container companies are likely to be allowed to fall into bankruptcy
instead of being saved by a larger firm through an acquisition,
doubt if operators have any interest in taking over an organisation.
They are more interested in buying fleets, just buying the ships and
hardware,” Harald Serck-Hanssen, head of global shipping for DnB
Nor, told Reuters.
executives said smaller companies could turn to shorter niche
routes. — Reuters
don’t fully support the notion bigger size is necessarily better.
It depends on your shipping network,” said Eng Aik Meng, president
of APL container shipping line, a unit of Singapore’s Neptune
Orient Lines .
lines are quite flexible. There are many other trades in the world,
not just Asia-Europe and transpacific, but also Latin American and
officials, however, pointed out that the smaller players would not
be easily pushed out of the market as many are family-owned or
subsidised by governments.
a rate war, no single line can be the winner,” said Kenichi
Kuroya, chief executive of Japan’s third largest shipping firm
Kawasaki Kisen Kaisha . “What 2009 showed ... is that any rates
quoted by the leading lines can be matched by others in one week’s
time. The rate war will continue until the bottom line is where no
single liner can bear.” — Reuters