More mergers and buyouts could help the ailing container shipping industry, said a recent report.
It said the growing supply of vessels worldwide coupled with shrivelling demand had created massive overcapacity, falling profitability and precarious cash-flow levels.
It also pointed to "gale-force headwinds", with the global fleet forecast to grow 4.6 per cent this year and another 4.7 per cent next year, as larger vessels and mega-ships continue to come online, while demand could lag by half or more.
The report by global consulting firm AlixPartners said "the argument for industry consolidation is sound", adding that mergers are necessary to "achieve the stability that traditional cost-cutting initiatives have failed to provide".
"Fewer competitors controlling more vessels should lead to more effective management of existing capacity and future vessel orders that would be more in line with demand forecasts," it said.
"Carriers in commoditised trades must reach scale to attain the operational efficiencies necessary to be profitable despite lower revenues.
"(Those) slow to achieve such efficiencies face the prospect of either becoming acquisition targets themselves or becoming marginalised or becoming bankrupt."
The report released last Tuesday noted the successful consolidation of the United States airline industry as a possible template for the container shipping sector, given the similarity in challenges faced.
Consolidation is gathering pace. French container shipping giant CMA CGM is set to complete its acquisition of Singapore's Neptune Orient Lines by June. Cosco Group and China Shipping Group merged to form China Cosco Shipping Corp, which began operations last month.
"While weak demand and industry-wide overcapacity are major challenges for all global shipping players, larger (and) financially strong shipping companies in Asia might be able to find further consolidation opportunities in the current environment," said AlixPartners managing director Lim Lian Hoon.
"Chinese shipping companies are particularly well-placed to pursue acquisitions of smaller operators, but will need to consider integration plans and also be wary of taking on too much debt in the process."
But CTI Consultancy partner Andy Lane believes more consolidation might not be viable, especially since it does little to change or resolve the dramatic slowdown in demand amid a supply overhang.
He told The Straits Times that many lines have suffered years of losses and chalked up very high gearing or debt, which means there are "not too many candidates that can actually make an acquisition".
"Industry leaders aside, the rest are not really big enough to take over others of a similar size," he said.
"Even if they do, it will not give them the scale to compete with Maersk, MSC or CMA - they will just be more exposed to larger losses. The mere integration of two deep-sea lines is going to come with hundreds of millions in one-off costs, and no one can afford that."
He added that there might not be many sellers or buyers in the market at a time when valuations are substantially down.
"It will take one or two lines to run into cash-flow problems and border on bankruptcy before we see a fire sale. Then, Maersk might move but only at a very knocked-down price, or MSC might break with tradition and acquire."
Mr Lane said lines need to tackle the lack of demand amid ever lower and highly volatile rates, through further operational efficiency gains and/or a more niche commercial focus. They do not benefit from trying to cover the entire world, when they might not corner much more than 5 per cent of the market.
"Consolidation is not a silver bullet to save the industry. Nor is it likely to happen on a grand scale."