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Transformation in
Container Shipping
Web: www.alphaliner.com E-mail: [email protected]
Long Beach 27 February 2017
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Page 1
Recurring themes in this industry
• Overcapacity
• Shipping companies struggle to stay afloat
• Governments continue to prop up struggling lines
How the container industry has transformed?
Very little has changed in the last 50 years
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Industry consolidation - Last 20 Years
Page 2
From this To This
Total containership capacity grew six-fold (6 X) in the last 20 years CAGR 9.4%
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Industry consolidation - Last 20 Years
Page 3
From this To This
Total containership capacity grew six-fold (6 X) in the last 20 years CAGR 9.4%
What has changed? 17 of the top 30 carriers are gone (or soon will be)
12 were acquired by other carriers (incl pending H-L/UASC & Maersk/HS deal)
3 Japanese lines to merge into 1 (pending KL/MOL/NYK) 2 went bankrupt (Cho Yang & Hanjin) 1 made voluntary exit (MISC)
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Industry consolidation - Last 20 Years
Page 4
From this To This
• But chase for scale, consolidation and formation of alliances have been ineffective in addressing over-supply
• Market share-based strategies have been biggest threat to sustained sector recovery
• After Hanjin Shipping debacle, low chance of another major bankruptcy • Uncertain future for : Yang Ming, HMM, Zim, IRISL, SM Line • Potential for further consolidation in the next 2 years
• But number of attractive targets very limited
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Is there still room for the smaller carriers?
Page 5
• Increased market concentration
• Top 7 carriers will control 70% of global fleet
• Only 13 global carriers remain
• Pressure on smaller carriers to reach sufficient scale to compete
• OOCL/Yang Ming/HMM/PIL/Zim face tough choices
• Wan Hai expected to remain as niche regional carriers
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Industry concentration at a record high
Page 6
• Top 10 carriers now control 68% of the total market capacity
• Would rise further with Hapag-Lloyd/UASC merger and Maersk/Hamburg-Sud merger in 2017 and KL/MOL/NYK merger in 2018
• Top 10 carriers would control close to 80% of global capacity by 2019
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Increased concentration does not mean less competition
Page 7
• Hanjin bankruptcy does not mark turning point for industry
• Korean blunder that is unlikely to be repeated
• Continued government protection for under-performing carriers
• HMM/Yang Ming
• Very low likelihood of another major bankruptcy
• Japanese carriers consolidation to take 18 months to complete
• Pre-merger maneuvering (prior to completion due April 2018)
• Price action by Japanese carriers observed
• Entry of SM Line
• Need to overcome shadow of Hanjin debacle
• Can expect aggressive discounting to fill ships
• HMM-2M strategic cooperation – a partnership of unlikely allies
• Highly lop-sided relationship
• Pressure on HMM to retain market share
• Alliance structure remains unstable
• 2M partners – constant tensions
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
0 20,000 40,000 60,000 80,000 100,000 120,000
FE-WCNA
FE-ECNA
FE-N. Eur
FE-Med
Estimated weekly capacity in TEU (Jun 2017)
OCEAN Alliance2MTHE AllianceOthers
New Alliances from April 2017
Page 8
14 weekly sailings (incl EX1 – CMA CGM/APL only) (9 PSW/5 PNW)
5 weekly sailings (3 PSW/2 PNW)
11 weekly sailings (8 PSW/3 PNW)
5 weekly sailings (4 Panama/1 Suez)
5 weekly sailings (3 Panama/2 Suez)
7 weekly sailings (6 Panama/1 Suez)
6 weekly sailings
5 weekly sailings
6 weekly sailings
4 weekly sailings
3 weekly sailings
5 weekly sailings
8 weekly sailings (HMM/SM/Zim/PIL/WHL/Matson) (6 PSW/2 PNW)
2 weekly sailings (Zim) (1 Panama/1 Suez)
No non-alliance service on FE-N. Eur route
1 weekly sailing (Zim) Estimated capacity increase
2017 vs 2016 (Peak Season Deployment)
(vs current Feb 2017)
FE-WCNA 4.9% (5.4%)
FE-ECNA 2.1% (9.6%)
FE-N. Eur 3.8% (7.4%)
FE-Med 1.2% (5.5%)
• Capacity increases across all main trades
• Hanjin’s capacity removed fully replaced
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
Over-supply remains key challenge in 2017 & 2018
Page 9
Supply growth in 2017-2018 remains biggest challenge for the industry
Carriers need to curb market share ambitions
Rate gains since Sep 2016 can dissipate very quickly
ALPHALINER
Transformation in Container Shipping © Alphaliner 1999-2017 – Contents not to be reproduced without permission
TPM Feb 2017
End Please send any queries to [email protected]
Page 10
Alphaliner clients include the following:
- Shipping lines - Investment Banks - Ports
