Liner market concentration presages omens for ports

Up until now, the major global port/terminal operators worked well with the large independent carriers and alliances. However when we take into consideration the expansion of the fleets based on the existing orderbook (as at September 2005) combined with the spate of recent acquisitions, then there is cause for concern and some deep thinking is going to be required.

And the future is likely to see a continued consolidation and concentration in the liner market. The latest acquisitions have taken place in Europe but the Asian carriers, particularly NOL, also remain players.

The top 15 liner carriers 1account for 86% of the global fleet if one takes into consideration the ships in service plus the current orderbook. The top five will control over 50% of global capacity. This concentration of market power is demonstrated by the very large disparity in size between the top two carriers and the rest, and the rapid decline in relative size as one goes down the table.

According to Clarkson’s Container Intelligence Monthly, COSCO have eight vessels of 10,000 TEUs on order while AP Moller (Maersk) have 37 vessels above 8,000 TEUs on order, primarily in Denmark at their own shipyard. (This excludes the most recent ones reported to be on order over 10,000 TEUs).

This concentration of market force suggests that owners of 150 or more ships (Maersk will have 622 and MSC 303) can operate independently of alliances and consortia. Maersk certainly provided an excellent example of this when they resigned from the Grand Alliance immediately after acquiring P&ONL. They are rumoured to be considering resigning from SAECS as soon as they can disengage from the old Safmarine/Deutsche Afrika Linien (DAL) agreement which runs to 2007.

The ability of at least five, possibly seven, of the top liner carriers to operate independently of alliances on a global basis suggests that they can also become a serious problem for terminal operators when it comes time for price negotiations.

Contracting will be focused on major global ports whose natural tendency is to link with the global supply chain management.

Why worry about this? Because the alliances are shifting.

Some will break up and the ports that service them will potentially find themselves in difficult situations. Maersk for example operates 33 of its own terminals. MSC is rapidly beginning to move into the same mode and Hapag Lloyd, if the purchase of CP Ships by TUI goes through, will also become a terminal operator. This comes at a time when the Port of Singapore (PSA) and Dubai Ports (DPI) are expanding internationally.

The upper hand will certainly be with the organisations that control large volume throughputs. The case of Ceres Paragon Terminals in Amsterdam proved this with the shift of some strings by the Grand Alliance where NYK – Ceres Paragon’s parent – is a member.

Next year’s terminal handling negotiations should be interesting.

Top 15 Carriers Current Fleet & Orderbook Ships TEU % of Total 1<$>Maersk/PONL 622 1,982,203 20.8% 2<$>MSC 303 1,002,902 10.5% 3<$>CMA-CGM 258 657,105 6.9% 4<$>Evergreen 178 605,994 6.4% 5<$>Hapag loyd/CP 147 497,178 5.2% 6<$>CHINA SHIPPING 102 462,989 4.9% 7<$>COSCO 150 446,075 4.7% 8<$>NYK 117 374,639 3.9% 9<$>HANJIN 82 353,804 3.7% 10<$>APL/NOL 92 314,475 3.3% 11<$>OOCL 77 313,283 3.3% 12<$>CSAV 99 312,625 3.3% 13<$>K-LINE 85 302,603 3.2% 14<$>MITSUI OSK 85 299,960 3.1% 15<$>YANGMING 84 263,408 2.8%

Total 2,481 8,189,243 86.0% Global Insight Analysis

1This takes into account the acquisition of P&ONL by Maersk; and assumes that the acquisition of Delmas by CMA-CGM and CP Ships by TUI, owners of Hapag Lloyd, are approved.