The Shipping Industry Enters a Brave New World

The Shipping Industry Enters a Brave New World
January 27, 2017 Hannah Marshallsay
shipping industry consolidation

With three mergers, two acquisitions and one liquidation, 2016 was the year of consolidation in the  container shipping industry. Hardly a month went by last year that we didn’t hear that a shipping company had acquired another, or was in financial difficulty or was forging new alliances.

This change in dynamics in the market is the result of the poor financial performance of shipping companies in recent years. As a result, shipping companies have been encouraged to combine forces to achieve benefits in the form of cost savings, potential revenue enhancement and greater ability to compete. Rate levels in 2015 and 2016 were unsustainable for the shipping companies which has been a driver for the consolidation within the industry.  This considerable movement in the market in 2016 resulted in a period of instability that posed a risk to the reliability of supply chains. What we are seeing now is an increase in freight rate levels to a more sustainable level and we would anticipate these levels to stabilise throughout 2017.  

Shipping Industry Consolidation

In 2016 shipping companies announced changes in the global alliance structure which will come into effect in 2017.

2016: Four Global Alliances: 2M, Ocean 3, G6 and CKYHE. (With 16 carriers shared within Alliances.)

2017: Three Global Alliances: 2M, Ocean Alliance and THE Alliance. (With 12 carriers shared within Alliances.)

The picture for 2017

The movement described above and the new relationships formed as result of the forced consolidation is a positive thing for the market as it creates a more stable position. We hope that, in the new world for the shipping industry, supply chains can be less susceptible to risk. Whether this plays out or not, only time will tell.

We will keep you updated as the year progresses on any further market changes.

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