Shipping Industry Sees Record-low Growth, More Consolidation, Lower Freight Rates

COSCO purchased another shipping company, as consolidation in the industry continues. (Image via Twitter)

As we reported in June, consolidation and shipping volume have been on the rise in the international shipping industry. Following the merger of China Ocean Shipping Co. (COSCO) and China Shipping Group, which was part of the Communist Party of China's plan to reform state-owned enterprises, COSCO has purchased China Shipping Haisheng and Hainan Haisheng Shipping, according to Splash24/7.

China Shipping Haisheng previously was a subsidiary of China Shipping Group, but went private after China Shipping Group sold its shares to Lanhai Group last year.

The slowing shipping economy, mainly in China, has made an international ripple. NPR reported that the global shipping industry saw record-low growth this year.

"This is likely to be one of the worst years ever in terms of losses," Janet Porter, editor-in-chief of containers at Lloyd's List, told NPR. "It is a very simple supply-and-demand imbalance—too many ships and not enough cargo."

She added that 6, 7 or 8 percent growth was normal in recent years, but this year will be close to 0 percent.

"China is a big factor in the container industry," Jonathan Roach, container marketing analyst at Braemar ACM, told NPR. "Where China is really the factory of the world and when the advanced economies slow, we're seeing less exports coming out of China."

Porter also noted that part what caused this problem was that companies had been over-ordering new ships, including the megaships that companies recently introduced.

"What we've had in the first half of this year, we're looking at 293 vessels ordered," William Bennet, senior analyst at Vessels Value, told NPR. "There's just no appetite for ordering at the moment."

Compare this to 2015, when companies ordered approximately 1,500 new vessels.

Due to the economic woes, freight shipping rates have dropped this past year. Nils Haupt, communications director for Hapag-Lloyd, specifically mentioned the low cost of shipping T-shirts.

"A T-shirt, just for shipping transportation, this is like 1 or 2 U.S. cents," Haupt told NPR. "[For a] pair of sneakers which is $100 in the shop, ocean transport cost per pair [is] approximately between 20 to 25 U.S. cents. So this is a ridiculous amount of money."