Expect More Ocean Freight Consolidation in 2017

The year 2016 will go down as one of the most tumultuous in ocean freight market history as new alliances were created, mergers & acquisitions increased and the threat of bankruptcy became real for one leading ocean freight carrier. 2017 will likely bring much the same according to our recent Twitter survey.


An overwhelming 72% of our 50 survey respondents indicated they expect more consolidation in the ocean freight market for 2017. According to maritime expert, Olaf Merk, “In 2017 there will be only eight carriers left from the 2014 top twenty.”
Alphaliner expects that by 2018, there will only be 14 carriers and half of them will move 65% of the world’s cargo.
If that’s not enough to raise an eyebrow or two, consider this, according to the Journal of Commerce, in 2000, the top five ocean carriers controlled 35% of the world’s container capacity. Just last month, in November, those ocean liners controlled 55% of capacity.
Is Consolidation Good for the Ocean Freight Market?
Like everything else in the supply chain business, it depends on who you talk with. According to Jim Newsome, president and CEO of the State Ports Authority, shipping line consolidation will ultimately benefit the Port of Charleston. “There will be the same amount of big-ship tonnage but fewer players, and that will make the industry more stable.” In addition, the Post and Courier newspaper notes that industry consolidation could let ports operate more efficiently and profitably in the long run.
For shippers, it may mean the end of historic low rates. Charles Deller, founder of consulting firm, 10XOceanSolutions, “What we are seeing now with mammoth GRI notices is a carrier attitude of “because we can”. Consolidation drives limited choice and market share drives potentially large pay days for those who control the supply of capacity”.
What’s next?
The waiting for the next shoe to drop has resulted in a lot of rumors to circulate on social media. Yang Ming, for example, has been the topic of many conversations as a possibility as an acquisition target. It recently announced the sale of its office in Taipei for $60 million. Splash 24/7 reports that the carrier has lost $407m in the first three quarters and will need to make some hard decisions about its future.
A few months ago, K-Line was rumored to be an acquisition target. As a result, the company downplayed the speculation.
To be honest, every container line can be considered an acquisition target, except maybe Maersk which will have an almost 19% share of global capacity when its acquisition of Hamburg Sud is complete. Overcapacity and historic low rates have certainly hurt the market and prompted Vice Chairman for CMA-CGM, Rodolphe Saadé to comment, “In 2016, most probably, none of the 20 top companies will be profitable, consolidation will continue because small shipping lines will not be able to survive; the small to medium operators will be looking for a big brother to acquire them.”
For shippers, the planning process is getting a bit more complicated. With the three new alliances expected to begin operations in April 2017, shippers will need to weigh the benefits of each and mitigate any potential risk as much as possible.
Based on our small Twitter survey as well as other articles, expect 2017 to be a continuation of 2016 – consolidation and the redefinition of the ocean freight market.


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