Is consolidation the only answer to containership overcapacity?

Malcolm Latarche
Malcolm Latarche

01 March 2016


A recent report (Container-Shipping-Outlook-2016 ) by Alix Partners suggests that after several years of poor financial results and consequent strategic economies ‘the carrier community may finally be coming to grips with the need for significant industry consolidation. Such consolidation will likely happen operationally, through more-powerful alliances, and financially, through mergers and acquisitions. From a purely financial perspective the report repeats what many have said before and many more doubtless continue to do for some time to come. There have of course been some notable recent mergers with the two Chinese giants coming together to form COSCOCS and CMA CGM’s acquisition of Neptune Orient, but the report like so many others talks only of carriers and not of owners. The Chinese operators being state owned entities own almost every ship they operate but this is not true of their western counterparts and neither is it of many of the smaller carriers around the globe. In many cases the ships are chartered from owners who are either traditional shipowners that own and manage their own ships but who prefer to time charter them out to carriers or they are banks and finance houses that have no real clue as to the workings of the shipping industry but who feel that there are profits to be earned. Carrier consolidation will not remove these ships from the market. They will still be there ready for an entrepreneur to acquire outright or more likely under time charter to operate as competitors. It is even possible – though not yet likely – that a shippers’ body such as ESC or ASC could even set up their own liner service with an appropriate shipmanager to take on the day to day running of the ships. Such a service would at least know what cargo capacity is needed and would not need, as so many carriers do, to continually add ships just to maintain market share and to attain the elusive growth that shareholders demand.