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Competitive Environment Caused Container Shipping Consolidation

July 26, 2017 12:05 am Published by

The world’s container shipping fleet, which has been replenishing itself with ever-bigger ships, has grown faster than the demand it serves. Unnecessary expansion by some companies, in an industry which over-values market share, has hurt industry competition by eliminating smaller carriers that cannot compete. This super-competitive environment has caused consolidation among the industry's leaders, whether it be a merger or container shipping alliance.

In a recent example, OOCL’s owners announced the company's sale to Cosco for $6.3 billion. The move will push OOCL former Chinese rival from fourth into third place, among the world’s container shipping lines. If the merger is approved by antitrust regulators in America and Europe, it will be the latest in a string of big consolidations – including Maersk’s acquisition of Hamburg Süd, a proposed partnership among Japan’s three biggest carriers, and Cosco’s earlier merger with China Shipping Container Lines.

According to Bimco, the container shipping industry is recovering. Thanks to the demolition of many smaller ships, the global container fleet grew more slowly than traffic last year for the first time since 2011. Albeit the momentum is positive, the recovery is vulnerable to a variety of dangers, including potential trade frictions and the remaining “supply overhang.”

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