2018 will be another interesting year for international containerized transportation business … and this is not necessarily good news for some industry players. The past few years have seen significant consolidation in the industry with seven mergers and one bankruptcy. The carrier industry has had a long-term ROIC of 3 or 4 percent and a cost of capital of at least 8 percent. Presumably, the mergers and the bankruptcy were a reflection of the desire by the entities that supply capital to the carrier industry to improve their ROIC and move it up toward their cost of capital.
The question for 2018 is, “Will they be successful?” The jury is clearly still out. While cargo volumes are up, so is vessel capacity, and there seems to be a new round of vessel orders developing that could lead to a continuation of the overcapacity and low rates that have plagued the industry since 2010. We’ll see.
I also see the industry consolidation continuing the trend of non-vessel operators gaining market share. In a world of fewer and larger carriers, I see BCOs continuing to search out NVOs to navigate the world of acquiring vessel space, react quickly to higher supply chain velocity, solve problems, and create value in the process of handling and managing their cargo. NVOs have used these tools to gain share in the past, and I see this continuing.