Three shipping alliances to control container shipping

Three shipping alliances to control container shipping

A complete restructuring of the container shipping business is about to begin. New analysis of the vessel sharing agreements has revealed the scope of the changes that are going to hit the market, while highlighting again the cut back in routes, port calls and options for shippers. From April four alliances will become three as the brand new Ocean Alliance and The Alliance start operations and the 2M Alliance with its slot sharing partner Hyundai Merchant Marine rolls out its new service offerings. 

Software solutions provider Cargo Smart studied the networks of the three alliances and made some interesting finds. For instance, nearly 70% of the alliances’ direct routes will be operated by one alliance, led by 2M that will control 31% of the direct routes being offered. The Ocean and The Alliances will gain two additional ports on Asia-Europe while losing five ports on the Trans-Pacific. Services from the three alliances using the Suez Canal will decline by 7% and while the percentage of services using the Panama Canal will remain the same, more than 50% will be operated by the Ocean Alliance. 

A total of 60% of the new alliance routes on Asia-Europe will have shorter transit times and half of those on the Trans-Pacific. Many transits on Asia-Europe and Trans-Pacific voyages will be two to three days faster on average, according to the CargoSmart data. One of many areas of concern to shippers will be that 50% of the routes to be offered by the Ocean and The Alliance will change from direct to transhipment. Fewer direct route options and more transhipment could lead to a greater change of missed schedules. 

Across all three alliances, the Asia-Europe trade will have net 50 new port pairs while the Trans-Pacific will have 120 port pairs less than the old alliances. The analysis also highlighted one of the key issues that will be faced by shippers using the new alliances. All shipments could be on the same vessel even if a shipper books with different carriers. For example, 37% of vessels in the Asia-Europe trade network of the Ocean Alliance will be operated by CMA CGM. Another finding by CargoSmart was that there will be fewer sailing days per week for the top five Asia-Europe trade lanes.

Shanghai-Hamburg sailing days will drop from five a week to four. Shanghai-Rotterdam from six to five and Shanghai-Antwerp will decline from five sailing days a week to three. For those ports with more services or vessels, CargoSmart warned that there may be shipment delays because of increased handling volumes at the ports. For instance, greater numbers of vessels will be visiting Rotterdam and the average vessel size will increase by 10%. (JOC)

Lay-up/Idle container vessels marginally decline

Compared to two weeks earlier, the capacity of the 20 March idle fleet contracted by as much as 18% or 43 ships/242,800 TEU to 279 ships/1,124,600 TEU, as apparently substantial extra capacity is needed for the new alliance’s networks. With a reduction of thirteen vessels, even the old Panamax segment managed to take advantage of the tighter market, which also pushed freight rates substantially upwards. Lloyd’s List Intelligence, using a different definition, counted a slightly higher number of idle ships (325 units), but with a lower aggregated capacity (730,700 TEU), representing 3.7% of the overall container ship fleet. The trend, however is the same. (DynaLiners)

2M partnership with HMM cleared by US regulators

The agreement marks a new era for Hyundai Merchant Marine after teetering on the edge of insolvency in 2016. US maritime regulators voted unanimously to allow 2M Alliance partners Maersk Line and Mediterranean Shipping Co. (MSC) to enter into a major slot exchange agreement with Hyundai Merchant Marine (HMM), the last US regulatory approval before the alliance squares off with the Ocean and The Alliances April 1. Although the arrangement is outside the scope of Maersk and MSC’s 2M vessel sharing agreement, it will effectively allow a combination of slot exchanges and slot purchases between the three parties. 

The arrangement will provide HMM access to the 2M network and allow the alliance carriers to take over a number of charters and operations of vessels, particularly on Trans-Pacific lanes, that are currently chartered to HMM. Although the 2M Alliance launched on April 1, the HMM agreement is effect March 30, according to the US Federal Maritime Commission (FMC). 

Although the FMC vote was unanimous, at least one commissioner, William Doyle, did voice some concerns. He said shippers should understand that terms and conditions set out in the 2M Alliance agreement are not available to shippers under this new agreement. Indeed, in the Maersk/MSC/HMM strategic co-operation agreement there is no reference to ‘2M’ anywhere in the agreement, Doyle said in a statement. 

Maersk has promised customers, 2M cargo will however only be loaded onto HMM vessels with customers’ express agreement and only on the HMM operated service that is part of the Asia to US West Coast slow swap agreement. MSC spokesman Joe Cook told JOC.com, it will be clear to its customers whether the booked vessel isn’t one operated by MSC and the company will work to let customers know if a vessel deployment changes. (JOC)

Singapore attracts Malaysian transhipment traffic

CMA CGM and PSA International’s Lion Terminal in the port of Singapore could upend the Southeast Asian transhipment market. CMA CGM and PSA International have doubled the capacity at their jointly owned Singapore container terminal as it prepares to handle the French ocean carrier’s mega ships and those of partners in the Ocean Alliance that launched on April 1. The CMA CGM-PSA Lion Terminal’s annual capacity has risen to 4 million twenty-foot- equivalent units (TEUs) with the addition of two new berths in phase two of the development of the facility that began operations last July. 

CMA CGM said the terminal has achieved an average gross berth productivity of more than 160 moves per hour handling mega ships since the beginning of 2017. This is another exciting milestone for CMA CGM as part of the group’s continuing efforts to make Singapore our main hub in the region, while reiterating the importance of Singapore to our global strategy, said CMA CGM Asia Senior Vice President Jean-Yves Duval. PSA Singapore, one of the world’s largest terminal operators, has a 51% stake in the joint venture, which was established last June. 

CMA CGM, the third largest container line by deployed capacity, holds the remaining stake. The deal was viewed as part of the Singapore government’s bid to win back some of the container traffic lost to the neighbouring Malaysian hubs of Port Klang and Tanjung Pelepas, which reduced the city state’s share of the Southeast Asia transhipment market, the world’s largest to 62% in 2015 from 89% in 2000.The French carrier was the biggest customer at Port Klang, accounting for over 20% of terminal operator Westport’s volume of around 9 million TEUs in 2015. Pressure on Port Klang and other transhipment hubs may continue to grow as the new alliances take shape. (JOC)

Reincarnation of Hanjin Shipping enters Indian market

SM Line, the so called reincarnation of ill-fated Hanjin Shipping, is readying itself to make an entry into Indian trades via a slot sharing agreement on weekly intra-Asia services that call Jawaharlal Nehru Port Trust (JNPT) and Pipavav. SM Line is entering an already crowded market dominated by Evergreen Line, Orient Overseas Container Line, Wan Hai Line, Yang Ming Line, Hyundai Merchant Marine, Regional Container Lines, ‘K’ Line and APL. With a huge capacity overhang and slowing trade volumes, freight rates on intra-Asia routes have bottomed out over the past few years and currently average between $ 5 and $ 10 per twenty-foot-equivalent unit (TEU) from Jawaharlal Nehru Port Trust (JNPT), India’s busiest container gateway to Shanghai. 

That could weaken further if the new entrant upgrades its Indian coverage with own tonnage. The six vessel consortium reportedly includes APL and Yang Ming and SM Line will have slot spaces for 250 TEUs per sailing. The 5,551 TEU YM Green will make the first JNPT call on Aril 7, according to local shipping sources. The joint loop, which SM Line will market as the West India (WIN) Service, has the following port rotation: Shanghai, Ningbo and Shekou, China; Singapore; Port Klang, Malaysia; JNPT and Pipavav, India; Colombo, Sri Lanka; Port Klang; Singapore, Vung Tau, Vietnam; Hong Kong and back to Shanghai. To steer its Indian operations, the carrier has se tup a local subsidiary named SM Line Corporation (India) Ltd. The company is also known to be weighing third party agency options to jump start liftings amid sluggish demand and fierce competition on intra-Asia routs. (JOC)

(The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business 

School (EEP).)