New Container Shipping Alliances Take Shape

Posted by PortVision

Container-Ship.jpeg

In April, a new alliance of ship operators took shape to offer global shipping services in Asia, Europe and the US. Included in this alliance are France's CMA CGM (the world's third largest container ship line), China Cosco Shipping, Taiwan's Evergreen Line and OOCL (Orient Overseas Container Line from Hong Kong). It will also include Singapore's Neptune Orient Lines ltd. In the near future – the firm agreed to be bought by CMA CGM in December. Assuming regulatory approvals are forthcoming from the US, the EU, and China, the new five-year “Ocean Alliance” will begin operating in 2017.

The service network will involve a fleet of 350 state-of-the-art container ships in the Asia-Europe, Asia-Mediterranean, Asia-Red Sea, Asia-Middle East, trans-Pacific, Asia-North America, East Coast, and trans-Atlantic trade routes. This extensive network and port coverage will bring a competitive strategy and risk reduction to the companies involved. It will also cut operational costs since ships, networks, and port operations are shared.

The Ocean Alliance is a direct response to the major vessel-sharing agreement between Maersk Line and Mediterranean Shipping Company, the two largest container lines, globally. Called the 2M Alliance, it is the only alliance that will remain unaffected by the new group. The 2M Alliance currently controls 27.7 percent of container ships. The new Ocean Alliance would control 23.5 percent of the global container ship capacity. Together, these two groups would comprise more than 50% of worldwide capacity.

If approved by regulators, which may take three months or longer, other alliances -- the G6, the CKYHE Alliance, the Ocean Three – will need to go shopping for new partners. The new alliance could signal more changes in global alliances to come.

These operational alliances, highly integrated vessel-sharing agreements, spread the risk by sharing vessels to lessen overcapacity or undercapacity situations. Major trade lanes carry these shared vessels in 90% of situations. Joint sales and marketing efforts are not allowed.

The Wall Street Journal commented that alliances like these add to port costs and complicate cargo handling since carriers in alliances often change the assignments for exports requiring movement of containers between cargo terminals.

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Posted on Jul 19, 2016 6:07:00 AM

Topics: Container, Shipping