With nearly 400 different vessel operators still active, there is plenty of competition and potential for more merger and acquisition activity, shipping consultancy Drewry said.
The collapse of freight rates during the second half of 2017, far out of line with the underlying supply and demand fundamentals, suggests that carriers have not yet rid themselves of certain self-sabotaging traits and that talk of a new golden age for carriers was perhaps exaggerated.
Despite recent developments, Drewry retains its view that the carriers are heading towards a brighter future, while also acknowledging there are several temporary factors that have created a bump in the road to recovery.
One area that might have been expected to have provided a more immediate benefit was the significant consolidation occurring in the market. The latest consolidation wave has barely become operational, with most transactions either just concluded or still pending.
Following completion of the outstanding deals, the leading seven carrier groups will control approximately 90% of the active containership fleet as it stood on October 1.
Yet, even with such a large swathe of the fleet in the hands of very few lines the industry remains highly competitive by standard measures.
Based on the known ship data series, there were 379 different vessel operators, all bar 31 of which garnered less than 0.1% market share. With so many operators on the water “there is clearly a lot of potential for more M&A, but in reality the majors are unlikely to be interested in the small fry.”
An analysis conducted by Drewry showed that, even after the latest M&A has concluded, the industry would remain ‘competitive’ or ‘moderately concentrated’ in most of the routes covered.
Two of the trades covered, northbound Europe-East Coast South America and westbound Europe-South Asia, do now fit the ‘highly concentrated’ description, but being relatively close to a Herfindahl-Hirschman Index (HHI) reading of 2,500, they are at the lower end of the definition.
Three trades, the two Asia-Europe headhaul routes and the southbound Asia-East Coast South America trade, moved from ‘competitive’ to ‘moderately concentrated’, where they will likely stay without further consolidation.
The Transpacific, Transatlantic and Asia to Middle East and South Asia headhaul trades are all still ‘competitive’ on the HHI scale. The addition of SM Line to Asia-East Coast North America will see the corresponding HHI number come down next year.
“The industry is heading towards a scenario whereby a small handful of dominant carriers dictate matters, but there is still healthy competition in most trades for now. Shippers will need to stay watchful for deals that impact their main routes,” Drewry concluded.