All aboard!

All aboard!

The container shipping industry in the U.S. is showing strong growth, yet remains highly fragmented with Maersk Sealand - by far the largest of the carriers - commanding less than a 12 percent market share on first-quarter imports and an even lower share on exports.

The second-largest carrier in both the import and export markets, APL Ltd., has been growing faster than the market overall - it climbed into the No. 2 spot on imports in the first quarter from 4th position last year - yet it commands only a 6.8 percent share on imports and a 5.6 percent share on exports.

With market share widely dispersed among more than 50 vessel-operating common carriers operating in the U.S. market, the industry remains highly competitive and quick to alter freight rate levels in response to changes in underlying supply and demand of vessel capacity. It also shows that carriers' periodic warnings that low freight rates could lead to consolidation and in turn higher rates, appear at the moment to be a distant possibility at best.

Figures for the first quarter of 2004 from the Port Import/Export Reporting Service (PIERS), a sister company of The Journal of Commerce, show that, as is typically the case given the widening U.S. trade deficit, import ocean container growth vastly outpaced that of exports. Import box volumes in the January-March quarter grew by 10.3 percent, while exports grew 7.6 percent.

Within the rankings, some important developments stand out. Among those are the fastest-growing carriers in the U.S. container market. Among the fastest-growing lines in the U.S. market and indeed the world is Geneva-based Mediterranean Shipping Co. Now ranked by BRS-Alphaliner as the second-largest carrier worldwide in terms of capacity deployed, behind Maersk Sealand, Mediterranean Shipping has also been growing rapidly in the U.S. It jumped to the No. 5 ranking in imports for the full-year 2003, up from the 11th position in 2002, partly on its growing emphasis on the trans-Pacific. On the export side, it jumped to No. 4 from No. 11 in 2002.

Other fast-growing lines in the first quarter include Marseilles-based CMA CGM, which was up 65 percent on imports to 106,832 TEUs and up 22 percent on exports to 60,068; and China Shipping Container Line, which was up 62 percent on imports to 107,110 TEUs and up 45 percent on exports to 31,296. The results show a continuation of China Shipping's rapid growth in the U.S. market. Its volumes grew 144 percent overall between 2001 and 2003, with its 2003 total volumes just exceeding half a million TEUs.

And China Shipping is poised to continue its growth. Its current order book is by far the highest among major container lines, according to Alphaliner, with orders for 238,638 TEUs worth of capacity, or more than 109 percent of its current fleet capacity. The next largest carrier in terms of order book as a percent of current fleet is CMA CGM, with orders amounting to 64.7 percent of its current fleet.

On the down side, Hanjin Shipping shows a 10.2 percent decline on imports in the first quarter compared with the 2003 first quarter to 207,845 TEUs, while Maersk Sealand showed a 5.3 percent decline to 412,783 TEUs. On exports, Maersk Sealand's volumes declined 17 percent in the quarter to 226,724 TEUs. It should be noted that carriers' volumes sometimes decline because they are being more selective in choosing more profitable, but lower-volume cargoes.

In climbing to the No. 2 spot in U.S. containerized imports, APL said it was investing in capacity improvements. "We're investing in equipment and terminals, and we've upsized some ships in the trans-Pacific. In doing so, we're trying to grow but also trying to grow sensibly," said Bob Sappio, senior vice president for trans-Pacific trade. "APL is investing a tremendous amount of resources so that we can accommodate the growth of our customers' business.