Container shipping equities Carrier strategies in 2021

The year 2020 was one of the best periods financially for the container shipping sector with most major companies expected to realise
returns above WACC after many years. This has brought to the fore a discussion about possible consolidations in the logistics/3PL
businesses in 2021 by carriers with deep pockets.
We believe carriers may opt for more vertical acquisitions because of the following reasons.
• Further horizontal consolidation, i.e., container carrier acquiring another container carrier, in the sector through M&A has been halted,
and no major transactions have taken place after 2017.
• Previous consolidations over the years have taken supply out of the market and rationalised the supply-demand imbalance and now
offers little scope for further consolidation, which will protect the currently favourable industry dynamic.
• The window of opportunity for more M&A has narrowed with fewer operators to absorb.
• The top 10 ocean carriers now control more than 80% of the total capacity market share, further M&A may draw scrutiny from
antitrust regulators.
• In the past, the main driver for acquisitions was the need to establish a presence on routes on which the acquirer had a limited or no
presence. For instance, Maersk’s takeover of Hamburg Süd, where the latter’s primary strength on its North-South trade reinforced
Maersk’s position in these trades.