The year 2016 was indeed a very tough year for the Maritime Sector. There has not been a more tumultuous year than the year 2016 for the maritime sector, especially the container shipping sector. Even the infamous recession and depression of the year 2008 fades in comparison to the challenges faced in the maritime sector for the year 2016.
The year 2016 was quite unpredictable in relation to the shipping industry. There were a lot of activities (both negative and positive) within the Top 10 Container Lines.
It has also been a year that has witnessed a lot of spectacular and unprecedented events such as the collapse of Hanjin Shipping. This grabbed the headlines for many reasons and caused momentary wide-spread panic in the container shipping sector. It also increased speculation that other lines may suffer the same fate and go bust. However, quite fortunately, the panic and speculation appears to have settled with confidence regained in the sector.
2016 was also a year of consolidation. During the year in question, we witnessed mergers of the following companies:
- The merger of China Shipping Container Lines and Cosco Container Lines which is envisaged will bring the total vessel to be owned by China Cosco Shipping Corporation to Eight Hundred and Thirty-Two (832) vessels, almost three times those owned by Maersk Line.
- The merger of Hapag-Lloyd AG (Hapag-Lloyd) and United Arab Shipping Company S.A.G. (UASC).
- The announcement of an impending merger by three (3) major Japanese carriers - Mitsui O.S.K. Lines (MOL), Nippon Yusen K.K. (NYK Line) and Kawasaki Kisen Kaisha (“K”Line).
We also witnessed the acquisition of:
- CMA CGM acquired Singapore-based Neptune Orient Lines, parent of APL;
- Whilst Maersk Line have also announced that it has reached an agreement to acquire Hamburg Sud.
The year 2016 also saw most shipping segments, except maybe for tankers bottoming out, with historically low levels of freight rates and weak earnings. On the one hand, the tanker market remained strong mainly due to the consistent drop in oil prices. whereas on the other hand, in the container segment, there was a steady decline in freight rates notwithstanding the short lived increase in freight rates following the collapse of Hanjin Shipping.
The container market continues to struggle with weak demand due to many of the behemoth container vessels coming in to the service throughout the year.
Measures like idling, slow steaming, consolidation, restructuring of alliances, integration etc have not slowed down the falling market.
The Nigerian Market
Just like the international market, 2016 is a year stakeholders would want to forget in a hurry.
The year started off with the nagging foreign exchange crisis. All stakeholders such as importers, shipping companies and other operators waited endlessly for a lasting solution to be found with the inconsistency and unpredictability of government policies being the order of the day.
The industry also suffered as a result of the Central Bank of Nigeria (CBN) directive in relation to the restriction placed in accessing the official exchange for foreign currency for the importation of 41 identified items. Cargo movement also dropped from about 6.3. million metric tonnes in January to about 5 million metric tonnes in November.
There has been loss in revenue as a result of the reduction in cargo volume. Many experts have blamed this on anti-trade policies of the federal government. The current hike in import duty is also not helping matters. It is estimated that Nigerian ports have lost about 80 percent of their vehicle cargo as a result of the import duty hike- this has done more harm than good.
The maritime industry also witnessed some positive developments. The appointment of Ms Hadiza Bala Usman as the Managing Director of the Nigerian Ports Authority has brought some long needed reforms to the industry but her efforts has been unable to totally change the long list of bad trade policies – we hope to see more changes in 2016.
2016 is a year every stakeholder in the world wants to forget as soon as possible. With the economic prediction of 2017 not looking too favorable, stakeholders can only be optimistic for a better year in 2017.
Damilola Osinuga is an Associate in the Shipping and Oil Services practice group of Bloomfield Law Practice, Nigeria
Ed's Note - This article was originally published here.
Photo Credit - www.mot.gov.sg