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The global containerized shipping and logistics industry has struggled over the past five years, with years of rapid growth through 2007 at an end and future demand contingent on ongoing economic recovery.
Due to lower global industrial production and goods needing to be shipped, industry revenue fell at an average annual rate of 0.6 percent to $166.1 billion in the five years to 2013, according to IBISWorld industry analyst Lauren Setar.
The global containerized shipping and logistics industry has undergone some extreme changes over recent years, most noticeably in 2008 and 2009. During those years, major companies placed ambitious orders for new ships as they struggled to build their capacity to meet then-high demand.
“Once the demand fell away, though, shipping lines cut routes and staff,” says Setar, “and many pulled some of their fleet out of the water to remain viable during the downturn.”
During 2009, as much as 10 percent of the world's container shipping fleet was not in active service, pushing down industry revenue 17 percent in the year. After a rebound in 2010, uncertain economic conditions have encouraged low inventory levels on the part of the industry's clients, which leaves the industry with far more capacity than is required to meet demand.
Beyond major players like AP Moller - Maersk A/S, Nippon Yusen Kabushiki Kaisha, Mitsui OSK Lines Ltd. and Carnival Corporation, the global containerized shipping and logistics industry is fragmented with a large number of small regional players or family-owned operations, especially in the coastal and inland water transportation segments.
The industry has a moderate level of market share concentration, attributable to the vast number of markets covered by the industry, a sign that economies of scope and scale exist in the market. Major players must be truly global to be competitive.
In the coming years, higher competition and bunker oil prices will pressure profit margins, increasing the potential for merger and acquisition activity as companies seek to expand their geographical reach and distribution networks by acquiring struggling firms.
Overcapacity is the only certainty the industry faces in the coming years. The industry is dependent on strong global growth and continuing globalization to strengthen, but the threat of a collapse in the Eurozone or a double-dip global recession remains real.
On the other side of the equation, the imbalance of ship supply to demand for shipping services will take longer to resolve. Segments of the industry, such as container shipping, are engaged in a race to build the biggest ship. The operator with the biggest ship captures the lowest cost structure and competitive advantage; however, the cumulative action has driven freight rates down and is expected to keep them there.
For more information, visit IBISWorld’s Global Containerized Shipping and Logistics industry report page.