Consolidation and decarbonization on maritime routes. Seaports and terminals under pressure from change
By Marek Grzybowski
The market share of the 4 terminal operators that are affiliated with the carrier continues to grow and has increased from 38.2% in 2021 to 40.5% in 2023. A similar situation is observed among liner operators, of which 4 dominate the container transport market. Seaport and terminal operators must also take into account the fact that logisticians optimize maritime delivery routes by calculating the carbon footprint of each product from door to door. The zero-emission nature of terminals is playing an increasingly important role in the choice of port. As delivery routes have become longer and operators face greenhouse gas emission fees, the pressure to optimize connections has taken on an additional dimension.
Concentration or monopolization
– All those who confuse correlation with causality will eventually die – but nevertheless I believe that what we see here [the concentration of operators and carriers – MG] is evidence of further vertical integration, in line with our analysis in our UN Trade and Development (UNCTAD) Review of Maritime Transport – notes Jan Hoffmann, Head of Trade Logistics at UNCTAD. He emphasizes that if China Merchants and Cosco were to merge, the global market would be even more monopolized, according to data from Dynamar B.V.
When planning investments in local ports, and Polish ports are such, we must be aware that their share in world trade is and will be subordinated to the global strategies of leading carriers and logistics operators. This can be seen when analyzing countries and seaports in the liner connectivity index. Poland ranks 5th in Northern Europe in the UNCTAD Liner Shipping Connectivity Index (LSCI). More about this is here.
It is the global alliances of transport, logistics companies and terminal operators that shape the global logistics chains, at the end (or beginning) of which Polish ports are located. As can be seen from the jumps in freight rates during the first half of this year, the situation on the market has not changed with the information from the end of last year that the European Commission decided not to extend the exemption of carriers from EU antitrust regulations after 15 years. The exemptions were intended to improve services and provide freight forwarders with benefits through cooperation between liner service operators. The decision of the European Commission was announced as a great victory for freight forwarders, who at the time were also forming alliances, merging with or acquiring competitors or partners. As can be seen from observations of the container market, nothing has improved in liner services. Freight rates have increased and the timeliness of deliveries has decreased.
More than 7 thousand container ships
It is estimated that there are a total of 7,035 active container ships in global maritime transport, including 6,242 container ships – reports Alhaliner on July 30, 2024. There are more than 30.35 million TEU of cargo space at the disposal of operators.
According to Alphaliner, the cargo space fleet on container ships reached 30 million TEU in mid-June 2024. The pace of growth of the global container fleet is extraordinary this year. – It took the industry about 50 years to reach the level of 5 million TEU in 2001 – reminds Tim Yuan, CEO of Dongguan Bowin International Freight Forwarding Co., Ltd. For comparison, the jump from 20 million TEU to 30 million TEU took just seven years.
– This year, 478 containerships with a capacity of 3.1 million TEU will be launched, 41% more than the record set in 2023, brokers BIMCO have calculated. The containership fleet is expected to grow by 10% in 2024. Orders for vessels continue to flow to Asian shipyards. Reports this week say that some of the most prominent Chinese yards currently have contracts for production until 2029.
However, of that number, 5,046 vessels and 28.9 million TEU are currently controlled by the world’s 30 largest carriers — accounting for 71.8% of all ships and 95.7% of all TEUs — according to data from Alphaliner. The four largest carriers control almost 40% of the market, including almost 90% of the Polish market. These are: MSC (20% of the market), Maersk (14.5%), CMA CGM Group (12.5%) and COSCO Group (10.8%).
When we consider the leading carriers, we can see significant differences. The 10 largest carriers account for over 84% of all containers transported by ships. Only the 5 largest carriers (MSC, Maersk, CMA CGM, COSCO and Hapag Lloyd) control 64.52% of all containers. The largest companies in the world clearly control the market and use of large container ships.
While MSC and Maersk – the two largest carriers – have an average capacity per ship of over 7,100 and 6,100 TEU respectively, the remaining companies outside the top 30 have a much lower average capacity of around 4,300 TEU per ship. It is no wonder that Maersk was the first to shorten the connection and will not be introducing mega-containers to the Baltic Hub. It can be expected that in 2024 the optimization of liner connections for other carriers will also be completed.
Container Market According to Maersk
Maersk announced the idea of transformation in 2024 a year earlier. What to Expect in 2024 – 5 Trends in Shipping was announced by Helene Hofman, Customer Communication Manager at Maersk. She assumed at the end of 2023 that there would be more capacity of ships, but that the demand for cargo space would be variable. Last year, it was necessary to prepare for the fact that we would encounter “a difficult combination of decreasing demand for cargo and increasing capacity [of the container fleet – MG]. At that time, BIMCO estimated that global container volume would increase by only 3% to 4% in 2024, while the global ocean fleet would increase by 7.8%, reaching a record capacity of 2.7 million TEU”.
Hofman predicted that in 2024, climate change and geopolitical tensions would become significant factors in international shipping. – Black swan events were a key trend for shippers in 2023. In 2024, the focus will shift from random, unexpected events to disruptive forces of climate change and geopolitical unrest. These could impact deliveries, cut off shipping routes, disrupt production and raise costs, Hofman predicted. Logistics operators should therefore “be prepared to anticipate challenges and be able to quickly and effectively address supply chain disruptions.”
Another trend identified is the continuation of consolidation. The sector’s merger and acquisition activity has been evident since the pandemic and shows no signs of slowing down in 2024. The Loadstar predicted that 2024 would be “the year of consolidation.” The crisis in the Gulf of Aden continues to severely disrupt global container logistics. As optimism is emerging, attacks on ships are rekindling. The “profound repercussions” of the Red Sea crisis resulting from the “domino effects” have caught carriers by surprise, wrote James Hookham, director of the Global Shipper’s Forum, in a recent blog post, saying last week that “there may be light at the end of the tunnel.” But, it should be noted, if something is on the horizon, it is hard to sail to it.
Decarbonization and computerization
2024 is a period in which shipowners make decisive moves related to adapting their fleets to the requirements of sustainable development and decarbonization of maritime transport. Shipowners want to recover a significant part of the costs incurred for decarbonization from cargo operators. They are also looking for partners with whom they can share costs. This is done under the clever action of “improving the sustainability of supply chains”.
The world’s largest survey of CEOs on sustainable development conducted by the UN Global Compact and Accenture confirmed that almost half of CEOs currently see supply chain responsibility as part of their sustainability strategy. Hofman asks the question: “will this dynamic be maintained in a difficult business environment. Will customers accept the additional costs of sustainable logistics, and will freight forwarders prioritize cooperation with carriers and agents committed to improving sustainability?”
The final accent is related to the computerization of maritime transport. IT in freight forwarding has not met the dynamically growing needs. – Instead, in 2023, most operators struggled to develop and maintain profitability, Hofman notes, emphasizing that “digitization has become a hugely important part of the environment for all freight forwarders.” As a result, more and more freight forwarders are investing in advanced technological solutions, using advanced IT systems and space technologies.
Ports under the dictation of alliances
In recent years, many freight forwarders have implemented tracking and control functions for shipments. In 2024, there has been clear progress in the implementation of a wide range of real-time cargo information. It is not only about customer comfort but also about maximizing the operational capabilities and profits of freight forwarders. IT technologies also support the processes of forecasting and crisis response procedures. It allows for more efficient decision-making and actions for sustainable development.
– Digitalization comes at a cost, but most in the industry now agree that it is necessary – notes Hofman, citing the results of the survey: “According to Accenture research, 76% of transport and logistics companies believe that a lack of focus on building digital capabilities “will seriously threaten their business.”
Alliances in 2025 will not necessarily dictate the terms of the global container shipping market. MSC has been preparing for its exit from 2M by increasing orders for new vessels to be delivered in the coming year. MSC is estimated to bring about 1.2 million TEU to the market in the near future. In this way, it will increase the total fleet by 20% TEU to 7.2 million – Auba calculates, emphasizing that “in fact, MSC’s order book is so large that it will exceed the expected TEU that Gemini Cooperation and THE Alliance will receive.” Once all contracts are completed this year, MSC’s control over the market will increase to 20.5% of the market of 30 carriers.
In summary, the container transport market will not only be controlled by alliances. 2024 is a year of consolidation in global logistics with consequences for local ports and terminals in 2025 and the following years. Investments and modernizations in Polish seaports and terminals, although carried out on a large scale, still show a delay in the expectations of global players. Not only those operating on the container transport market.
