$50bn blackhole leaves box shipping ripe for further M&As: Drewry

$50bn blackhole leaves box shipping ripe for further M&As: Drewry

Container industry revenues are contracting faster than carriers can cut costs, Drewry warns in a new report. First-half results so far suggest sales are down by around 18%, increasing the pressure to reduce costs.

“The container shipping industry is currently enduring a severe revenue contraction that is placing carriers under enormous pressure to squeeze more savings wherever they can and is driving the latest round of M&A activity,” the UK-headquarted consultant noted, describing first half results so far reported as “very depressing”.

Carriers are on course to post full year combined revenues some $29bn less than in 2015 – marking a worse performance than the previous nadir, 2009.

Drewry predicts container lines will lose $5bn this year.

“With carriers waving goodbye to likely more than $50 billion of sales in two years since 2014 – in 2009 the sales reduction was about $66bn in just one year – it should be no surprise that most of the big players are losing money and that some are close to the financial abyss, or that a number of lines are merging in order to better prepare for such hard times,” Drewry noted saying the M&A moves thus far have been “defensive strategies forced upon carriers by the weak state of the market”.

Adding to carriers’ woes, the third-quarter peak season will probably be a washout too, Drewry warned.

Concluding, Drewry predicted: “Prolonged losses will increase the likelihood of more container M&A or more industry consolidation among carriers.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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