winners losers 2016 container shipping

Container Lines Saw Mergers, Alliances, & Bankruptcy in 2016

In the past year (2016), the container shipping sector has been challenged on many fronts. Falling freight rates – which have been under pressure since 2007 – coupled with years of struggling with over capacity, have weighed heavily on all of the industry’s participants.

From shipping ports and container terminals to box carriers big and small, 2016 was characterized by mergers, alliances, and bankruptcy.

Mergers and Acquisitions

Japan’s three largest container lines – Nippon Yusen Kaisha, Mitsui OSK Lines Ltd. and Kawasaki Kisen Kaisha Ltd. – announced late in November of 2016 that they planned to merge their operations. This consolidation gave them control of 7 percent of the world’s container shipping trade.

Earlier in 2016 also saw the merger of China’s top two carriers, Cosco and China Shipping Container Lines.

maersk line container shipping consolidation

We welcome consolidation. Our industry is fragmented and consolidation can help transform our business for the benefit of our customers. – Spokesman For Maersk Line

Hapag-Lloyd AG was very active in container liner acquisitions in 2016. Following the German container shipper’s purchase of CSAV, the company invested in the United Arab Shipping Company (UASC). This investment gave Hapag-Lloyd access to UASC’s six 18,800 TEU container ships, as well as a larger market share. This moved the company from the sixth-ranked container line, to fifth globally.

The popular French carrier CMA CGM acquired Neptune Orient Lines, the Singapore-based owner of APL.

Alliances and Partnerships

The OECD reports that currently almost all of the world’s major container lines are part of a global alliance. On certain routes such as Asia-North Europe, the vast majority of services – 21 out of 22 – are offered by the major container shipping alliances.

bimco consolidation

Consolidation is one of the remedies to cure the horrible market – Peter Sand, Analyst at BIMCO

Maersk Line is the 2M vessel alliance with the world’s number two ranked container line, the Mediterranean Shipping Company.

The three Japanese liners (mentioned above) that merged in November of 2016 are part of a vessel-sharing group with Hapag-Lloyd AG, known as the Alliance.

Bankruptcy

Beginning in 2007 an excess of container shipping vessels, coupled with weakening trade growth, drove container lines to try to underbid each other’s freight rates. This ultra-competitive environment proved to be crippling for some industry leaders. South Korea’s biggest container shipping line, Hanjin Shipping Co., became the first victim of the price war; filing for bankruptcy protection in August of 2016.

Looking Ahead To 2017

Analysts and industry leaders agree that freight rates have likely hit bottom. This means that there is nowhere to go but upward and back to profitability. This improvement, coupled with the reduction in competition resulting from the year’s mergers, acquisitions, and bankruptcy, means that investors in the shipping industry can expect a much more favorable market in 2017.

must do research to find good investments

You Must Do Research To Identify Good Investments

As a result of the dismal performance of global stock and bond markets in the last decade, many investors have begun to seek-out the dependability of alternative investments. If you are one such investor, exploring what alternative investment offerings are best for you means doing thorough investment research to identify which options have performed well in the past, as well as look the most promising for the future.

Generally speaking, before anyone makes a big, important purchase – such as buying a house or a new car – they are likely to shop around and explore the market for the best option. Ideally, they will identify a viable option that satisfies their immediate and long-term needs; without posing a risk to their finances and/or lifestyle. It should not be any different when it comes to identifying appealing investment options.

With all the information available today, especially on the Internet, potential investors can find out all the information they need to make a well-informed, and perhaps more importantly, a confident investing decision.

For investment-seekers pursuing alternative investments, it is important to review the past performance of every offering to get a better understanding of where a market or industry may be headed in the future. For example, shipping container investments have delivered consistent returns for investors for decades and with the rising demand for cargo containers, they are expected to continue to provide a great investment experience for decades to come. In fact, to offer an element of protection against any traditional investments that perform poorly in the future, an increasing number of global money managers are recommending hard assets like shipping containers be included in investment portfolios.

Whether buying a shipping container, a new home, or an automobile, investing in the time to perform proper research BEFORE making a financial commitment, is an investment that will avoid false information and significantly increase the odds of making the right investment decision. Doing so will ensure your financial success today and in the years to come.