Operators in the heavily fragmented intra-Asia trades are coming under severe financial duress and could become the targets of takeovers by global liners, according to a new report from Danish container experts, Sea-Intelligence.
Intra-Asia rates did not enjoy the extraordinary leap experienced on the deepsea trades during the pandemic and recently some Intra-Asian routes have seen rate levels drop far below even pre-pandemic levels, Sea-Intelligence warned in its latest weekly report. Analysts at rival consultancy Linerlytica have stated many intra-Asia routes have been loss-making since the start of the year.
“It means that the cash position of the smaller intra-Asia carriers – most of which do not provide public accounts – will be substantially worse than those of the global carriers,” Sea-Intelligence pointed out, suggesting these regional carriers will enter “challenging” territory much earlier than the global carriers.
“It also means that the global carriers will face a market where they will have plenty of cash with which to acquire these smaller intra-Asian carriers,” Sea-Intelligence suggesting, adding that global carriers are likely putting “severe” pressure on intra-Asia freight rates right now in order to push a number of regional carriers to the point where they will have to accept an acquisition offer.
Also likely on the acquisition trail are the Middle Eastern terminal operators DP World and Abu Dhabi Ports who have bought carriers and entered this market in recent years.
The highly competitive intra-Asia trades are massive, accounting for 15.4% of all container movements last year, according to data from Drewry (see chart below).
Liner consolidation over the past decade has been extreme. Today the top 20 carriers command a 91% market share of the world’s container trades, according to data from Alphaliner. Back in 1980, that figure stood at just 40%.
With the exception of the ongoing privatisation of South Korea’s HMM, targets for acquisitions by global carriers these days tend to favour regional operators.