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- Watts Shipping Register
- Watts Shipping Register
Containerisation Carries on Regardless
DescriptionCONTAINERISATION has claimed many casualties over the years. Few of the early pioneers managed to survive the cutthroat container shipping trades through to the half century mark and neither of the world's two greatest trading nations have a deepsea container shipping line to call their own any more. The past 15 years have seen many famous names lose their independence or disappear altogether as a new breed of mega-carriers emerged on the scene. In the US, the big three of American President Lines, Sea-Land Services and Lykes were all sold to foreign buyers. In Britain, famous brands such as Cunard and P&O have vanished from the liner trades.As container shipping reaches the 50 year milestone, the lines driving the industry forward are a diverse bunch from a variety of corporate and national backgrounds. Perhaps surprisingly, it is not just companies from countries with large export or import trades that now dominate the industry. Far from it, with Denmark's Maersk Line and Switzerland's Mediterranean Shipping Co controlling the world's two largest boxship fleets. Contrary to what many may had expected by now, European lines are still very much in charge. Four of the top five carriers are European-owned, with France's CMA CGM now ranked third and Germany's Hapag-Lloyd fifth as it absorbs recent acquisition CP Ships. The only Asian line in this elite club is Taiwan's Evergreen Group.But those at the top know they will have to put up a stiff fight to fend off competition from Chinese lines that have leapt up the leader board in recent years. Both China Shipping and Cosco have large containership newbuilding programmes and the benefit of a huge domestic cargo base as they continue to expand their global networks. Japanese lines, on the other hand, appear to be less concerned about where their containership fleets come in the global league table and more interested in developing a complete menu of logistics services that brings together a wider range of ship types.As the pundits try to pick future winners and losers, it is not just the present group of global carriers that are among the contenders, with large regional operators such as Pacific International Lines or Wan Hai starting to make their mark in the longhaul trades. There is no shortage of container lines that want to grow, and one strategic merger or acquisition can transform the face of the industry. That is what Hapag-Lloyd, ranked just outside the top 10 before its takeover of CP Ships, has shown. The greatly expanded Hamburg group has vaulted into the top five.So where does the industry go from here? One factor is likely to remain a feature for a long while yet. Despite the shake-out of recent years that has seen consolidation between some of the biggest lines in the world, container shipping is still a very fragmented business. Maersk, even after buying arch rival Sea-Land in the late 1990s and then acquiring P&O Nedlloyd last year, still has a market share of below 20%. That is not enough to become a price leader and bring freight rate volatility to an end.The industry remains vulnerable to sudden and dramatic price swings. With so many players in the market, the consensus is for further rationalisation to come. But this leads to another characteristic that is unusual in today's corporate world. Many of the premier lines are family-owned, and still run by their founders, who are most unlikely to want to lose control by selling out. No-one in the industry expects Maersk Mc-Kinney Moller or his family, MSC's Gianluigi Aponte, CMA CGM's Jacques Saade or Evergreen's Chang Yung-fa to be in the slightest bit interested in mergers that would weaken their grip on businesses they have nurtured over the past 30 years. The question is whether their sons and daughters will feel as passionately about the business as their fathers. As the next generation begins to take over, they will be faced with an industry still, to some extent, in its formative years. Sharp swings in freight rates underline the fact that container shipping continues to be driven by pure supply and demand and remains more akin to the tramp shipping trades, or base commodities, than a value-added service industry.Nevertheless, changes are afoot. Three landmark deals in the late 1990s - when APL was bought by Singapore's Neptune Orient Lines, Sea-Land was sold to Maersk and P&O Containers merged with Nedlloyd - were followed by several years of slow corporate activity. Then suddenly, last year, Maersk swooped on P&O Nedlloyd, Tui beat off other interest to acquire CP Ships and CMA CGM finally bought compatriot Delmas. Those three deals alone will have far-reaching consequences for the whole industry, not least because of the need of numerous liner shipping alliances and consortia to find replacement members or forge new partnerships. But overshadowing all else as container shipping looks forward is the revolution taking place on the high seas. The cargo-carrying capacity of large containerships has doubled over the past decade with the first vessels able to carry the equivalent of 10,000 20 ft containers, at least in theory, about to enter service. Even larger units are on the drawing board.Most of the mega-carriers now have ships of 8,000 teu either on order or already in operation, and the next few years will see a staggering number delivered. The containership fleet is set to grow by more than 50% between now and 2009, and how lines manage such a massive influx of new capacity could determine the longer-term shape of the industry. Some industry leaders, notably Evergreen's outspoken chairman Chang Yang-fa, have warned of the dangers of over-investment and predicted that there could be bankruptcies if trade growth cools. Others challenge that view, arguing that the operators should not be too hard hit in any downturn since they can simply trim their fleets by returning chartered tonnage to owners. Those companies that own but charter out rather than operate their ships could be most exposed should supply and demand move way out of balance, according to one line of thought.The increasing influence of charter owners has been one of the features of the industry in recent years. Another development that has become increasingly apparent over the past few years, and seems likely to remain, is the shrinking number of lines with stock market quotations. With P&O Nedlloyd and CP Ships no longer listed since they were taken over, there are fewer opportunities than ever for investors.Many of the major players are in private hands, able to make investment decisions away from the prying eyes of analysts and keep freight rate and cargo volume information to themselves. That situation, together with the inevitable demise of the conference system that pre-dates containerisation but which has been a backbone of the industry over the past 50 years, suggests that container shipping will become even less transparent than it is today. Container line bosses constantly complain that their vital contribution to global trade and a world of cheap consumer goods is barely appreciated outside industry circles. Given the instinctively tightlipped attitude of most players, the industry attracts little coverage in the mainstream media - hence the lack of understanding in the wider world about its role. That is the way it is likely to stay while so many players are still competing for industry domination - and so reluctant to reveal their hand.Containerisation may have reached middle age, but with so many flirtations, marriages and divorces, there is little sign of this industry growing old gracefully.
Date posted31st October 2010
New Zealand Ship and Marine Society (14th Sep 2015). Containerisation Carries on Regardless. In Website New Zealand Ship and Marine Society. Retrieved 26th Mar 2017 05:23, from http://nzshipmarine.com/nodes/view/93