Liner Shipping : An oligopoly ?

Paula Stefan concludes : Yes, it is !

By Paula Stefan,  16, June 2016

Firstly check this  short video  : The Shipping Lines Oligopoly :

The liner shipping industry can be characterized as an oligopoly. It is important to examine the market structure in three levels: the industry, the alliances and the trade level. The market is characterized by globalization. As a result, there is a need to meet customers' demands and invest in resources as well as technology. So we can say mention the expansion of the world economy and the world trade. Shipping companies have two choices, form an alliance or the other one is mergers and acquisitions.THE


In the global container shipping industry we could meet collusions which are more commonly known as "shipping conferences". We all know that their principal activity is to fix freight rates in certain routes and set barriers in the entry of new firms. Conferences are cartels acting like monopolists, because there were substantial scale economies in the industry that led to a small number of firms (Marshall,1921). After the abolishment of the anti-monopoly immunity of freight conferences (18 October 2008, Regulation 4056/86) and given the trend of growing consolidation the market evolves into a more collusive market where operational agreements are more important.The market has become more concentrated and the smallest operators have a market share of less than 1% each. Top 10 carriers have a market share of 63.5%. Comparing to the market share of top ten carriers in 2000 which was 49.3% (alphaliner) there is a remarkable increase in market share as well as in total TEUs. Moreover, few firms hold most of the market power and probably can influence in a high grade the market. They can set entry barriers and also make agreements on the freight rates. It is very important for firms to cooperate and acting like monopolists. As a result, each firm must be aware of the other players' actions.Due to, this oligopolistic characteristic the industry is more complex and needs to face many factors. Moreover, the rapidly changing customer requirements, the deployment of ever larger container vessels, advances in information technology, increasing competition and intense consolidation.Leading to few firms controlling the high trade routes and to the phenomenon of multi-trade strategic alliances.


We can also measure the degree of concentration by analyzing the alliances that have been created over the past years. This is a common implication in oligopolistic markets and of great importance. An alliance helps to obtain greater market shares and control more effectively the trade routes as well as the capacity.We can notice almost five advantages in the trend of alliances in the global container shipping industry. Furthermore, it can serve more efficient wider geographically routes. Secondly, they can plan their vessels in a more global scope. Of course, there is less risk, because risks are shared. They can offer more frequent services to their customers, meaning more frequent schedules. Lastly, economies of scale become more visible and there is also an increase in the size of the ships.Of course, alliances have a great impact in the market share, but it is difficult to cooperate as the size of the group increases. They act like monopolists, because they can influence the price. Competition makes difficult to other firms to compete or enter in the market. This characteristic is of highly importance in order to survive in this tough market where overcapacity and decreasing demand exists nowadays. Firms may find many reasons why to join an alliance: strategic reasons, operational reasons, in order to increase or decrease connectivity to increase or decrease capacity, to introduce a new service, to suspend a service, to merge services, to demerge services, to offer slots for charter and to offer slots.


As an example, in the route Black Sea - Far East the top seven firms have a market share of total 89%, so the other firms have only the rest 11%.In the US, the top ten firms hold almost a 65% of the total market share. So we can say again that in trade line exists an oligopoly, but the firms are much more and hold less market shares. A close exam of this market shows us that competition is greater, but the market is larger and very attractive to new firms. As a result, if we use efficiently the oligopolistic characteristics firms will increase their market shares and it will be more difficult for new firms to enter. Of course it is difficult to cooperate efficiently when the size of the group increases, but you can handle more adequate the capacity and the competition something that is very important nowadays.


The global container shipping industry is mainly an oligopoly (few players and mainly provide similar services). Highly concentrated markets lead in many occasions to collusions or cartels. It is very dangerous due to anti-trust laws, especially after the abolishment of the anti-monopoly immunity. However, such agreements are very beneficial for the participating firms. It is best off to cooperate, but it is very difficult especially when the size of the group increases.

Back to News