zoom Consolidation in the container shipping industry is happening for the first time in a decade and will likely continue in 2016, according to a new report from AlixPartners advisory firm.The containerized-ocean-freight industry suffered considerably in 2015 amid continuing financial woes and all signs point to a continuation of this trend into 2016 and beyond.The most-recent forecasts expect global container fleet capacity to grow by 4.6% in 2016, and another 4.7% in 2017, though spot prices for major routes have dropped 21 to 44% from a year ago because of plunging demand, now about half the current growth forecast.In order to cope with the newly created situation, carriers in commoditized trades must reach scale to attain the operational efficiencies necessary to be profitable despite lower revenues.“Carriers slow to achieve such efficiencies face the prospect of either becoming acquisition targets themselves or becoming marginalized or becoming bankrupted,” the report says. “However, the means of achieving that scale can itself present a longer-term burden, merely postponing rather than preventing bankruptcy.”Many carriers have faced debt issues for several years. Industry debt peaked at close to USD 114 billion in 2013, fueled by tonnage investment; and due to meager free cash flows, some carriers were soon struggling to cover interest payments. Industry debt level has retreated to less than USD 90 billion as carriers pared back capital commitments to larger tonnage and other capital projects, trimmed costs, redelivered excess charter tonnage, and, in some cases, divested of noncore assets.AlixPartners believes that thorough and effective postmerger integration is required to ensure that the newly combined carriers achieve reduced costs and increased revenue.Industry debt peaked at close to USD 114 billion in 2013In order to survive the transition, carriers should take vital measures and scrutinize balance sheets, reduce liabilities, and continue to divest of noncore assets so as to reduce debt burdens. In addition, they should exploit the ability to continually lower slot costs in order to grow margins in core liner businesses; and uncover opportunities: internally through cost-cutting initiatives and externally through collaborative partnerships.“Carriers that successfully shore up both their balance sheets and their income statements will likely be in prime positions to lead consolidation as the industry reshapes itself. Carriers that are not part of industrywide consolidation must find niche markets—in terms of trade lanes and specialized cargoes—to survive independently,” the report reads.In conclusion, the advisory firm says that in many ways, the recovery playbook for the container carrier industry has already been written by the airlines.“Tight control over capacity, combined with disciplined—and sophisticated— commercial management, has turned industry profitability around. But the potential pitfalls, too, are painfully clear, as the largest network airlines battle lingering challenges such as IT glitches and labor sentiment,” the report concludes.
Mr. Pato’s comments were part of his UN address, delivered during High-Level week of the General Assembly at UN Headquarters in New York.As host of this year’s Asia Pacific Economic Cooperation Forum (APEC), Papua New Guinea, said Mr. Pato, will see many major issues discussed, including several related to the 2030 Agenda for Sustainable Development, particularly climate action and gender equality.Mr. Pato described the Agenda as “a solid pathway that holds much promise for the international community.” He acknowledged that it is essential that Papua New Guinea fully harness the potential of its young people, who comprise some 60 per cent of the population, and ensure that women and girls have full equality in Papuan society.Almost a year after the closure of the Australian-run Manus Island migrant detention centre in Papua New Guinea, Mr. Pato said that his country is working closely with Australia in resettling qualified asylum seekers.Migrants still remain in Papua New Guinea and that each will be addressed on a case by case basis, he said, adding: “that is our contribution to the extent possible, in partnership with Australia, to address human trafficking, people smuggling and transnational crime.Turning to the implementation of the Bougainville Peace Agreement, the Minister noted the international community’s increasing interest in the referendum, one of the pillars of the Agreement, which is scheduled for 15 June 2019.He announced that his country’s Government is fully committed to the Agreement, and has appointed former Irish Prime Minster, Bertie Ahern, to preside over the work of the Bougainville Referendum Commission.On Friday, UN chief António Guterres recognized the efforts of the Pacific Islands Forum (PIF), of which Papua New Guinea is a member, for taking forward peacebuilding priorities, and congratulating the Government of Papua New Guinea and the Autonomous Bougainville Government on implementing the Agreement: Mr. Pato expressed his gratitude to the UN, and other partners, for working with Papua New Guinea on this “important national issue.”Full statement available here read more