AmericasContainersMaritime CEO

Atlantic Container Line: ‘Carriers obsessed with market share instead of profitability’

Westfield: Container carriers continue to chase market share much to the detriment of their bottom lines, says the head of one of America’s top boxlines.

“The vast majority of carriers are still obsessed with vessel size and market share instead of profitability,” says Andrew Abbott, the president and ceo of Atlantic Container Line (ACL).

With the alliances becoming bigger and more concentrated, alliance carriers can no longer differentiate themselves on service versus their competitors on the same ships, Abbott, a 35-year veteran in the industry, contends. They can only differentiate themselves on price, which is why many rates are still non-compensatory. “I guess some people like to carry containers for practice,” quips Abbott.

With ships getting larger and larger, and companies automating to cut costs, the big lines can no longer provide the level of customer service that once endeared them to their customers, the American says.

“When you have a weekly capacity of 25,000-plus teu, it is impossible to babysit everyone’s cargo,” Abott says, adding: “So middlemen like 3PLs and NVOCCs have sprung up to deal with the end customer, but taking a big chunk of the profit margin in the process.”

Another big change in the industry that Abbott believes is hurting many is that fewer lines today are being run by businessmen, with bureaucrats taking the top posts.

“It is interesting to note that the lines whose top management have proven track records in business – lines like Maersk, OOCL and a few others – seem to be building a track record of profitability versus those bogged down with political baggage,” Abbott says.

Overcapacity is hitting almost every container tradelane these days.

“There are too many ships in the world today, and lines are too focused on the headhaul trades around the world,” Abbott says, noting: “The Asian lines have severely damaged the transatlantic, treating it the same as the transpacific or Europe-Far East.”

Historically, the Atlantic rates were always within 20% of each other in both directions because the volumes have always being within 20% of each other. But that fact has been ignored, and today the rates mirror the transpacific, with US import rates much higher than export rates.

“Transatlantic profitability is much lower than what it could be, if people would only treat it as a stand alone trade,” Abbott reckons.

ACL owns 12 conros and PCTCs. The five largest conros in the world are operated by ACL in its core North Atlantic trade. The remaining seven conros and PCTCs are chartered to its parent company, Italy’s Grimaldi Group.

ACL is replacing all of its five conros with vessels that have double the container capacity and 50% more roro capacity. Today ACL has a 4% market share of the North Atlantic container market; the new vessels will enable the company to reach 8% market share, making it one of the top four carriers in that relatively small trade.

ACL’s status as a niche carrier has seen it become the envy of the liner world. It has been one of the five most profitable carriers in the world every year since 1994, according to the line’s boss.

Splash

Splash is Asia Shipping Media’s flagship title offering timely, informed and global news from the maritime industry 24/7.

Comments

  1. Sadly, history teaches us that attention paid to profitability in established liner trades results in trade share shrinking to vanishing point, simply because others are piling ’em high and selling ’em cheap. The old liner shipping companies of Europe seldom went out in a financial smash; they commonly dwindled away whilst remaining more or less profitable.

Back to top button