The new super carriers - and the few ones being left behind

10/07/2017
Lars Jensen CEO, Partner at SeaIntelligence
The consolidation in container shipping continues, with OOCL now being taken over by COSCO - with the usual caveat that we need to see the ruling from relevant competition authorities. This also means that the fragmented market with a large number of global carriers we had only a few years ago is being irrevocably changed to a landscape dominated by 6 super carriers (or 7 depending on how one defines this). And this is before we even contemplate the scenario where COSCO might attempt to procure 24% of CMA CGM.

Gone (as independent entities) are CSCL, Hanjin, APL, Hamburg Süd, OOCL, UASC, CSAV, MOL, NYK and K-Line. Zim has strategically repositioned itself to not be a full global carrier, but instead become a niche carrier.

The new league of super carriers is comprised of Maersk, MSC, COSCO, CMA CGM, ONE, and Hapag Lloyd.

This leaves Evergreen, Yangming and Hyundai Merchant Marine.

Evergreen does have quite a sizeable orderbook, and it might be argued that they should be seen as the 7th, and smallest member of the group of super carriers. But they need to effectively utilize that scale against the 6 other super carriers.

Yangming and Hyundai Merchant Marine, however, are far away from having a size even closely resembling that of the new breed of super carriers. A key competitive parameter ahead in the market is size - or, more aptly, the utilization of advantages provided by size. Let's just contemplate one of these.

One is the network size. On the key east-west trades which a global carrier need to have a presence on, this is conveyed through the alliances. For now both HMM and Yangming are "protected" through the 2M and THE Alliances. But that they are parts of these alliances already seems as a relic from a past where carriers were smaller and more plentiful. Yangming joined THE Alliance as one of 5 carriers (Hapag-Lloyd, NYK, K-Line, MOL, Yangming) - an environment where they were an equal partner with the Japanese compatriots. Now they are a very small partner compared to Hapag-Lloyd and ONE. For HMM this was even more acutely visible when they finally got a deal with 2M - they are not even a full member of the alliance, but had to accept the deal in order to survive. A number of years into the future, the alliances will get re-shuffled again, and unless they change materially, these two Asian carriers will find it difficult to survive as global carriers.

But challenges also present themselves in aspects such as financing the digitization and automation projects, the ability to refinance debt, strategic negotiation leverage towards for examples terminals and inland providers etc etc.

The final comment is in relation to the super carriers. One thing is size - and they certainly do have that. But the other is customer service. We have for many years seen more a race to the bottom than a competition on service levels. The effect of the super carrier emergence is that carriers need to plan for a future where they, in essence, will all have a very low cost base, and competition will have to be fought on service levels in order to differentiate.
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