Container Analytics
with Ben Meyer
In general terms, market share refers to a company’s sales relative to the total sales of a given industry or market segment. Shareholders, investors and analysts like me put a lot of stock (no pun intended) in market share as an indicator of a company’s competitiveness and, therefore, its profitability.
In the ocean liner industry, however, this concept is difficult to quantify as carriers are reticent to publicize actual sales and vessel utilization figures. As a result, we tend to talk about market share of deployed vessel capacity – the amount of space operated by each carrier – but capacity is merely the amount of supply in the market, as opposed to the amount actually sold.
Large-scale carrier alliances and vessel sharing agreements further complicate this issue, especially in the major east-west trades, because it is difficult to know exactly how much of the capacity on a given vessel or service is allocated to one carrier or another.
For the purposes of this discussion, however, we will assume that the capacity available to a carrier on a trade is equal to the number of slots it deploys on the trade. Simply purchasing space on other carriers’ ships is the business model of an NVOCC, after all, and not that of an ocean liner carrier.
To be certain, there is quite a bit more that goes into a company’s – ocean carrier or otherwise – profitability than just market share. Reliability, rate management, customer service, overhead costs, investment strategy, and many other factors influence the profitability of an ocean carrier. The question is: should market share (as currently measured) be considered among these factors?
The adjacent chart, built with data from BlueWater Reporting’s Carrier Ranking Report, compares total market share by deployed capacity for the top 13 ocean carriers as a percentage of overall deployed capacity. Capacity assigned to subsidiary lines like Maersk’s Safmarine and CMA CGM’s Delmas, as well as recent acquisitions such as CSAV, which was purchased by Hapag-Lloyd, are included in the total deployed capacity of the parental carrier.
In this month’s cover story (“Sailing to profit“, pages 24-30) we’ve ranked Maersk Line, CMA CGM, CSCL, OOCL, and “K” Line as the top money-makers in 2014 with the caveat the privately held carriers such as MSC, UASC and Hamburg Süd do not publish their financial statements. Interestingly, our list of top carriers by market share looks quite different.
Source: BlueWater Reporting. Sure, Maersk, which has been setting the standard for profitability in the industry for some time now, still sits at the top of both lists along with 2M Alliance partner MSC and CMA CGM, but what about the rest of the carriers?
Hapag-Lloyd, which controls the fourth largest section of overall carrier market share with 5.42 percent of deployed capacity, lost over $100 million last year. Fellow G6 Alliance members APL, MOL and Hyundai Merchant Marine all similarly had losses in the $100 million range – MOL topping $200 million in red ink – despite accounting for 3.56 percent, 2.59 percent and 2.04 percent of the overall market, respectively.
On the flip-side, carriers with very similar market share percentages like Evergreen Line (4.91 percent), COSCO (4.04 percent) and CSCL (3.2 percent), for example, reported healthy profits of over $100 million in 2014.
This is not to say market share by deployed capacity is completely meaningless, just that it may not matter nearly as much as people (myself included) may have made it out to be. What is more important, perhaps, is where that carrier has the majority of its market share. In other words, a carrier’s overall market share across all trades may not be nearly as indicative of its profitability as the trades on which it chooses to focus. ZIM, for example, pulled out of the highly-competitive-but-often-unprofitable Asia-Europe trade entirely in 2014 to focus on so-called smaller trades, reducing their overall market share in the process, and the result has been that the company reduced its losses to only $12 million from $191 million the year before.
Meyer is web editor of American Shipper and a research analyst with BlueWater Reporting. He can be reached by email.
This column was published in the July 2015 issue of American Shipper.
