Consolidation offers a ‘golden opportunity’ for container shipping lines
Consolidation offers a ‘golden opportunity’ for container shipping lines. The takeover of OOCL by Cosco Shipping Holdings means that the container shipping sector is now dominated by seven super carriers.
UK consultancy Drewry highlights the significance of this: by 2021 the top seven ocean carriers will control approximately three-quarters of the world’s container ship fleet. Back in 2005 the same bracket of carriers held a share of around 37 per cent. This consolidation has arguably been positive for shipping lines. Drewy said that this factor along with brighter market prospects, offers carriers a golden opportunity for far greater profitability soon.
And there are positive factors for shippers too: chief executive of Seaintel Lars Jensen points out that because consolidation means that the major carriers will all have a very low cost base, service levels could be pushed up as this will need to be the differentiating factor.
The OOCL/Cosco deal is also important in other ways: it is likely to signal the end of the recent consolidation activity in the container ship sector, because the size of the top seven box shipping lines would make it difficult for them to obtain approval for future merges.
Also, the takeover involves a 9 per cent stake from Shanghai International Port Group. Cosco is reportedly acquiring a 15 per cent stake in this port group. Therefore, Drewry commented that SIPG’s involvement in the OOCL deal is “not a left-field move but very much further evidence of the consolidation and intertwining of Chinese-owned port sector activity”.