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Top 7 container lines operate 90pc of active box ship fleet: Drewry

THE leading seven container shipping lines will shortly control 90 per cent of the active containership fleet after OOCL merges with Cosco Shipping and the leading three Japanese carriers join together their container divisions under the Ocean Network Express.

As of October 1 2017 there were 379 different vessel operators, but apart from the top 31 carriers none of the remaining container shipping lines command a market share above 0.1 per cent, data from Drewry shows.

"The industry is heading towards a scenario whereby a small handful of dominant carriers dictate matters, but there is still healthy competition in most trades for now," Drewry said in its Container Insight Weekly, reported IHS Media.

Shipping analyst SeaIntel said niche carriers were being hit by the consolidation and capacity injection by the alliances and were fast losing ground. The analyst found that the niche carriers faced greater competitive pressure as they were marginalised.

"The larger carriers are expanding their fleets rapidly - and with a larger fleet comes the ability to design an ever more granular network. A more granular network will increasingly be a competitive threat to niche carriers from a product design perspective," SeaIntel was cited as saying.

The analyst said at the same time, niche carriers were reducing the number of vessels operated as they increase their vessel sizes to achieve advantages of scale. This, however, was weakening their ability to field a detailed granular network, further exposing them to competitive pressure from the larger carriers, SeaIntel pointed out.

Despite a strong increase in container volume through the peak season period in the run up to Christmas, freight rates headed south. From a June 30 high of US$1,015 per TEU, spot rates fell steadily to a 12-month low of $681 per TEU by October 21, according to the SCFI weekly data on east-west trade lanes tracked at JOC.com's Market Data Hub.

Analysts believe carriers putting in extra loaders contributed to the surplus capacity on the route and kept downward pressure on rates.

Drewry remains positive that shipping lines are on track for a brighter future, although the analyst acknowledged that there were several temporary factors that have created bumps in the road to recovery.

One area the analyst felt could have provided a more immediate benefit was the significant consolidation occurring in the market, but after reflection said the fact that mergers and acquisitions have not so far materially changed anything was not that surprising.

"The latest consolidation wave has barely become operational, with most transactions either just concluded or still pending. Moreover, even after all of the latest deals are finalised, they alone do not have sufficient weight to move the industry all the way to being a non-collusive oligopoly," Drewry noted.

"If anything, we perhaps overlooked the risk that the merger activity would make some predators more aggressive with their pricing, to minimise customer attrition."