The containership sector is heading for hard times according to most analysts. There has been a falling demand on key trade routes, notably on the Asia to Europe routes. There is now a price war on such routes which will have a serious effect to the profits of the major players. Container Trades Statistics data shows that Asia-Europe volumes in the January- September period, at 11.1 million TEU, was 4.7% lower than last year.

Singapore, the world’s second-busiest container port after Shanghai, handled 16% fewer containers in October compared to the same period a year earlier, recording its eighth consecutive month of decline in box throughput compared to the previous year.

In last month’s edition, I mentioned that Maersk were forecasting much reduced profits, down from $2.2 billion to $1.6 billion. Its third quarter results were down 61% and they are cutting the workforce by 4,000 jobs. They are also cancelling all newbuild options, suggesting they expect this depression to stay around for a while.

Already the main container lines work together in various alliances. The world’s two biggest container companies Maersk and MSC joined together in the 2M alliance in the early part of 2015 which has probably helped both companies from even worse financial forecasts. COSCO, K Line, Yang Ming, Hanjin and Evergreen are part of the CKYHE alliance, whereas China Shipping, CMA CGM and UASC form the Ocean Three group. Hapag Lloyd, OOCL, APL, MOL, NYK and Hyundai form the G6 alliance.

What is likely to happen now is that larger companies in the container sector will be taking over some of the smaller shipping lines.

Maersk made overtures to Neptune Orient Lines (NOL), the owners of American President Lines. NOL issued a statement to the Singapore stock exchange in early November confirming that preliminary takeover discussions were underway with Maersk, but then CMA CGM also joined in the battle to take over the Singapore based company, which during the past year has slipped from 10th to 13th place in the league table of the world’s top container lines. Maersk then dropped out of the running and CMA CGM have just succeeded in taking over the Asian company.

Earlier this year Hapag Lloyd took over CSAV of Chile and that would appear to have benefitted both companies as Hapag Lloyd have now risen to fourth place behind Maersk, MSC and CMA CGM.

The Japanese lines MOL, NYK, and K Line are not faring well, at 9th, 14th and 15th place respectively, and an alliance between these companies is a very real possibility.

In the meantime talks are going ahead between COSCO and China Shipping, discussing the way forward to a likely merger between the two Chinese giants. There are quite a few issues to iron out as the two lines belong to different current alliances, but some form of merger would seem to be the logical way out of their declining profit and loss account. Trading in shares of both companies have been suspended while talks go on.

We are certainly going to see quite a few changes in the container sector in the coming year. Watch this space!