Global container shipping has always been a complex market. Never more so than since the Hanjin collapse and this years launch of the new shipping alliances.

Maersk’s merger with Hamuburg-Sud, Cosco’s takeover of OOCL and the Japanese trio’s merger are just the most recent examples of the industry consolidation that is seemingly designed to reduce shippers options to a dwindling number of global carriers, who now control over 70% of the market and over 90% from Asia.

Having suffered depressed freight rates due to a slip in global demand and rampant overcapacity, that led to two years of declining profits, demand is increasing and all the signs are the market is turning into a carriers market.

The shipping industry’s problems have been self-inflicted.

A race to the bottom as carriers consistently undercut each other, which continued until, inevitably, it ended in bankruptcy for a major carrier and Maersk’s Line’s worst financial reporting since World War 2.

While low rates were beneficial for shippers, the instability and drop in service levels that accompanied them were not.

From 2016 the industry began its process of healing.

Seven major mergers or acquisitions, one bankruptcy, and hundreds of scrapped ships later, the industry looked to 2017 and the launch of the new shipping alliance as their rose-tinted future.

The first half of 2017 has seen steady volume increases and even more steady rates for the carriers.

Disruptions from the new shipping alliances repositioning vessels, port strikes and other one-off supply chain interruptions continue, but they have yet to have a significant impact on the global liner industry.
Madrid Maersk
In fact, some analysts suggest the global shipping industry may recoup $5 billion in profits this year, or nearly the same amount that it lost in 2016.

But a strong recovery means shippers should take note and prepare for a sellers’ market. After all, the shipping industry exists — like any other market economy — in a boom-and-bust cycle. After a trough is a steady recovery, and the low rates (and savings) enjoyed by shippers may slowly disappear, too.

And after this trough, a look at capacity and market figures reveals how the global shipping industry reorganised itself into a sort of oligopoly. A price worth paying paid for stability perhaps?

In forthcoming blogs we will consider how the shipping industry transformed in two years and the factors that influence rate levels, and how they may move in favour of shippers.