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Carriers turn corner in 2016-2018 consolidation 'super-cycle'

Mon 31 Jul 2017 by Rebecca Moore

Carriers turn corner in 2016-2018 consolidation 'super-cycle'

'Oligarchy' of carriers has deep repercussions on box ship industry

The round of consolidation recently seen, culminating with Cosco’s acquisition of OOCL, will give carriers more control over the market and push them back to profitability.

Drewry’s latest Webinar on its Container Market Freight Rate Outlook points out how the carrier consolidation super-cycle has shrunk the top 20 carriers to 11, which will have very deep repercussions on the entire shipping industry and also on the level of competition between carriers.

Drewry Supply Chain Advisers director Philip Damas said that these carriers are moving towards an “oligarchy that will give them much more control than in the past”. 

Indeed things are looking up for the fewer global carriers left – the consolidation and break from ordering big ships means that they will return to profitability. Drewry has forecast that a financial deficit in 2016 will turn to an overall global US$5Bn profit for container shipping lines this year.

We are already seeing much stronger freight rates – a 16% hike in global rates this year versus last year, something not seen for the last six or seven years.

Drewry head of research products Martin Dixon said that “Industry consolidation and the demise of Hanjin has changed the commercial landscape and pricing discipline, which is important in supporting strengthening rates.”

Mr Damas says his personal view is that the M&As will lead to hundreds of millions of dollars of synergies, while carriers will make much better use of the capacity they have acquired from companies and reduce capital expenditure. This therefore means that they will generate more revenue.

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