Recent mergers and the formation of mega-alliances will benefit a container shipping industry that suffered a collective operating loss of $3.5 billion last year. But, according to UNCTAD’s Review of Maritime Transport 2017, consolidation also poses a threat to competition.
“Increased consolidation among carriers could bring some order to a market in need of better supply management and improved efficiency, and the pooling of cargo could improve economies of scale and reduce operating costs,” said the report.
However, Shamika N. Sirimanne, Director of the UNCTAD Division on Technology and Logistics, warned it also poses a potential threat to shippers and other industry stakeholders, including terminal operators.
“The risk is that growing market concentration in container shipping may lead to oligopolistic structures,” he said.
Indeed, according to the UN, the rules governing consortia and alliances may need to be revisited to determine whether new regulations are needed to prevent market power abuse by lines.
“In many developing countries’ markets, there are now only three or even fewer suppliers left,” added Sirimanne. “Regulators will need to monitor developments in container shipping mergers and alliances to ensure there is competition in the market.”
The report also argued that the influx of mega container ships into the global fleet was now putting ports under intense pressure to invest in new equipment and improve handling speeds. “In addition, they must cope with the cascade of vessels from main trade routes to secondary routes, as well as increasing concentration and consolidation in liner shipping and growing cybersecurity threats,” it added.
Yet although investment was critical for ports striving to improve performance, the UN said expenditure should be carefully weighed. “Although investment is key for ports to improve, the amount needed to accommodate ever larger ships may not be worth the extra cost, unless the bigger vessels guarantee more cargo,” said the report. “Otherwise, ports will have invested in larger yards and additional equipment to handle the same total volume.”
The Review of Maritime Transport 2017 also found that, on average, transport and insurance costs account for about 15% of the value of global imports, but was much higher for smaller and more vulnerable economies - on average 22% for small island developing States, 21% for the least developed countries and 19% for landlocked developing countries.
“The persistent transport cost burden on many developing countries stems from lower efficiency in ports, inadequate infrastructure, limited economies of scale and less competitive transport markets,” said the report.
“Helping developing countries improve the factors behind high transport costs is therefore key for economic development. This can be done through soft measures, such as providing training and facilitating reforms, or hard measures, such as upgrading infrastructure and improving equipment.”