Consolidation the 'only way forward' for container shipping

The formation of container shipping alliances is becoming more important for shipowners in a market where lowering slot costs and maximising capacity utilisation on larger ships are increasingly relevant, according to a senior industry player.

Mahesh Sivaswamy, chairman and ceo of Transworld Group, believed that consolidation is the “only way forward” for lines against the backdrop of a prolonged sluggish global container shipping market.

Container lines have struggled with overcapacity during a time when boxships are getting bigger in sizes while demand on the main Asia-Europe container trade has been soft.

“Synergy is the key word moving forward,” Sivaswamy told delegates at the Asia Pacific Maritime 2014 conference held in Singapore on Wednesday.

He highlighted the recent merger agreement between two of the world's leading container carriers, Hapag-Lloyd and CSAV, and the proposed formation of the P3 alliance shows that lines themselves have understood the advantages of pooling resources.

“Even the world's top three lines [Maersk Line, CMA CGM and MSC] are forming the P3 network as they understand it is too risky to standalone under the present market environment,” Sivaswamy said.

Last month, Taiwan's Evergreen Line joined five other container lines, Cosco, K Line, Yang Ming and Hanjin Shipping, to form the new CKYHE Alliance, with the aim of optimising their efficiency and enhancing their network coverage.

Sivaswamy pointed out that alliances among the bigger boys will eventually force out the smaller players, leading to capacity tightening which may in turn help to drive up freight rates.

He added that the alliance model is relevant not only in the main shipping trades of Asia-Europe and transpacific but in the feeder and shortsea services as well.

Thomas Kriwat, ceo of Sri Lanka’s Mercmarine Group of Companies, projected a prolonged downturn for the container shipping market in view of the influx of mega-sized vessels, especially those in the range of 14,000-18,000 teu in capacity.

 

The coming together of container lines would be a relevant long term strategy in order to keep operating costs low and weather through the weak freight market, Kriwat said.

“Owners have to start adjusting themselves to the market situation, and those who have will stay ahead of the competition and raise overall operating efficiency,” he said.

Posted 19 March 2014

© Copyright 2019 Seatrade (UBM (UK) Ltd). Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Seatrade.

Lee Hong Liang

Asia Correspondent

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