According to MANA, The trend toward consolidation among container shipping firms will continue into 2018 as larger companies look for opportunities to increase market share, while smaller companies seek to increase efficiency to maintain profitability," said Moody's vice president and senior analyst Maria Maslovsky.
Consolidation via slot purchase agreements and alliances will help companies boost operational efficiency by combining their shipping assets to have a broader client base without the need to take on more debt that may affect balance sheets, and to incur transaction risks.
The ratings agency thinks shipping firms will continue to be on the lookout for alliances and slot purchase agreements if possible with those who decide not to be part of it likely to be at a competitive disadvantage due to the lack of scale or resources.
It does however think that regional shipping lines such as Taiwan's Wan Hai Lines which serves niche markets and do not compete with larger carriers on the main trade lanes.
Although container shipping mergers and acquisitions will continue to exist in the industry landscape as owners seek the revenue and cost synergies resulting from such agreements, strong operational execution will be the key factor that decides whether such transactions succeed or fail, it said noting the recent mergers between Hapag-Lloyd and UASC, as well as CMA CGM and NOL.
"The impact of debt-funded mergers and acquisitions on companies' creditworthiness would depend on a number of factors, including the company's ability and focus on restoring its metrics to within the rating agency's guidance over a 12-18 month period," said Moody's.