Shifting fortunes of the box sector

Malcolm Latarche
Malcolm Latarche

17 May 2016


For all the talk of a need to consolidate in the container sector it looks as if that with a few exceptions, the current players prefer to keep their independence as far as they can and instead have merely rejigged the alliance structure. As from next April there will likely be just three alliances on the East-West route with each having an approximately equal share of the trade. The number of players in each is diverse with the 2M (Maersk and MSC) having just two, the Ocean Alliance four (CMA CGM, COSCO, Evergreen and OOCL) with the newly announced THE Alliance providing a home for six including all the Japanese lines and possibly expanding to eight if UASC and HMM are accepted into the club. How successful the new groupings will be in managing to push up freights to an economic level remains to be seen but with so much excess capacity the likely outcome will be not a lot. Of course the last decade or so has seen some unsettling factors that must be playing on the minds of container line executives. In planning for today they cannot ignore what tomorrow might bring. It was not that long ago that the speculation was all about an ice-free Arctic that would permit much shorter routes between China and Europe although to be honest that is probably something that none active in shipping today will see in their lifetimes. Then it was the expansion of the Panama Canal which is happening and will be operational in the very near future. An enlarged Panama could very well be more of a game changer than has yet been thought through. Trade flows have altered constantly throughout history as demand for products and materials changes and new trading partnerships are formed between nations. Certainly the volumes on some established routes appear to be diminishing or growing at a much slower rate than was predicted making the strategies adopted by line operators in newbuilding look unwise as events unfold. In the not so very distant past, operators of general cargo ships ran round the world services using both Panama and Suez canals, the poor profitability on some legs offset by better bookings on others. Some of those services survived into the container era but as ship size outgrew the Panama they gradually faded. If attempts to pushback against globalisation succeed, it may well be that the patterns of trade will change again and a return to round the world services may provide better employment for box ships than the current structure especially since the Panama will soon be able to accept most of the box ships now afloat leaving just the largest to find a way to survive