Shipping lines are concentrating their power to survive a downturn in trade that is causing losses, according to Parakrama Dissanayake, chairman of Aitken Spence Shipping, the transport arm of Colombo-based Aitken Spence Group.

“The bottom line for shippers is that they will eventually have four to five groups controlling 85 per cent of global capacity,” he told the Sri Lankan branch of the Institute of Chartered Shipbrokers (ICS), reported Lanka Business Online.

“There is a strong possibility of a further consolidation of lines through mergers and acquisitions. The top 20 carriers now control 84 per cent of shipboard capacity – there is a concentration of power,” said Mr Dissanayake.

“In 2012, some 250 vessels with a total capacity of 1.4 million TEU have come on stream of which 55 ships will be larger than 10,000 TEU capacity, he said. “It will be a case of survival of the fittest for lines in 2012. The global fleet of 8,000 TEU ships will grow by 20 per cent while overall demand growth is only 5.4 per cent.”

Mr Dissanayake said the growing concentration of power among fewer shipping lines was an outcome of the global economic downturn triggered by the economic crises in the West that has caused a slowdown in trade.

The slowdown in cargo volumes amid the deployment of new, bigger ships on trade routes had also led to a reduction in freight rates.

Lower freight rates were causing massive losses among shipping lines, he told a forum organised by the Sri Lanka Branch of the Institute of Chartered Shipbrokers (ICS) to mark its 25th anniversary.

“There has been a massive decline in prices shipping lines get from exporters and importers who had fantastic year in 2011 at the cost to shipping lines,” he said.

The downturn and overcapacity caused by a glut of new buildings had led shipping lines to form alliances. The current bevy of rate hikes by shipping lines struggling to avoid losses might not last because of an expected flood of big new vessels that will add to the already serious overcapacity, he said.

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