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John Reeve

Consolidation within the container shipping industry has been an inexorable force since the mid-1980s. In 1986, the Top 20 carriers controlled around 35 percent of total industry capacity. By late 2011 the Top 20 share had increased to almost 85 percent.

This trend is likely to continue for a number of reasons: poor financial returns due to persistent industry overcapacity during a period of weak global economic growth that favors large operators able to exploit the economies of scale; the “portfolio effect” of large carriers serving multiple markets with global networks that softens the impact of poor returns on particular routes when other markets are faring better.

Consequently, we are likely to see continued consolidation within particular countries with a number of carriers (e.g. Japan, Korea, and Taiwan) and across national borders. However, the impact of this consolidation may not be considerable for some time.

Even at today’s 85 percent share for the Top 20, the industry remains relatively fragmented. Compare this level of concentration to the small package industry dominated by UPS and FedEx on an increasingly global basis.

2011 saw the container shipping industry “revert to form” in the face of increasing overcapacity with aggressive pricing to secure or increase market share at the cost of poor financial returns. It is unlikely this behavior will change in the near future despite ongoing industry concentration until the Top 10 (not 20) carrier share reaches the 90 percent level – still far below the level of concentration in the small package business.