The tone of The Boston Consulting Group’s 2012 report on the container-shipping industry (which assessed industry realities in 2011) was somber. (See Charting a New Course: Restoring Profitability to Container Shipping, BCG report, October 2012.) We noted that multiple challenges were plaguing companies, particularly container liners, or carriers. The challenges included record losses, depleted cash reserves, the specter of bankruptcy, and slowing demand for carriers’ services. Equally sobering, competitive pressure in the liner industry was intensifying, along with price wars triggered by carriers’ reactions to a self-inflicted supply-demand imbalance.
Our analysis of the industry in 2013 and 2014 reveals that the picture has not changed much since 2011. Following the volatile period from 2009 through 2011, observers were hoping that the industry would bounce back somewhat, buoyed by economic recovery from the most recent global recession. But the eagerly anticipated uplift has not yet materialized. Indeed, companies still grapple with numerous challenges that are being driven primarily by overcapacity and a highly fragmented industry structure.
Choppy seas indeed, requiring navigational savvy—but not necessarily cause for abject despair. In fact, some carriers have managed to turn a profit in this tough environment, suggesting that there is hope for the industry.
Recovery will take strenuous work, but we believe that even the more embattled carriers can catch up to their profitable peers. To do so, they’ll have to come to grips with the industry’s new normal, establish a solid strategic position, revisit their business and operating models, pursue new transformation levers, and rethink alliance models.
In this report, we address the situation in several ways:
- Analyzing the industry’s persistent supply-demand gap and forecasting the five-year outlook for freight and time charter (TC) rates
- Examining the industry’s fragmented value chain and financial performance
- Considering more sophisticated alliances that could help carriers create more value