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Global Supply Chain News: As Ocean Container Carriers Finalize Alliance Plans, Shipper Group Warns about Impact of Alliances and Megaships


Alphaliner Details Alliance Share by Major Trade Lanes, While New Report from Global Shippers Forum Says Alliances, Megaships Not Good for Shippers

Nov. 15, 2016
SCDigest Editorial Staff

The continued challenging environment for ocean container carriers has led to sweeping changes in the sector over the past few years, including ever larger megaships now pushing past the 20,000-TEU capacity threshold and the formation of alliances to share vessel capacities across groups of carriers. Those alliance moves have in fact come in part from the need to fill up the new generation megaships.

Two of the new alliances - the OCEAN Alliance and THE Alliance - plan to start operating next April. The two groups recently unveiled the respective service networks which they plan to start operating when they go live.

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The report also questions whether the economics of the megaships are really working out for shippers, ports and other parties besides the carriers.

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The OCEAN Alliance (formed by CMA CGM (including APL), COSCON, Evergreen and OOCL) will start with an initial deployment of 331 ships with an aggregate capacity of 3.3 million TEU. This figure is based on Alphaliner's analysis of the 41 weekly services unveiled on November 3 by the four alliance members.

The OCEAN Alliance will thus become the largest consortium in container shipping history, with an initial plan to offer 20 weekly sailings from Asia to North America and 11 weekly sailings from Asia to Europe. OCEAN will also jointly operate three transatlantic strings and seven Far East - Middle East/Red Sea loops.

The second new carrier group, THE Alliance, has six carrier members: Hapag-Lloyd (with UASC), K Line, MOL, NYK and Yang Ming. It would have had a seventh member had South Korea's Hanjin Shipping Co. not recently gone bankrupt.

THE Alliance also unveiled its new network plan on November 8, showing it plans to offer 31 weekly services from an estimated total of 244 ships with an aggregate capacity of 2.25 million TEU. They carriers will jointly provide a total of 16 transpacific loops and eight Asia-Europe services, together with six transatlantic loops and one Far East-Middle East string.

The third alliance, the 2M network, consists of just the industries two largest carriers, Maersk Line and Mediterranean Shipping Co. and is already in operation.

According to the analysts at Alphaliner, to start that will leave the respective market shares - at least in terms of capacity - on Asia to the Americas (transpacific) and Asia to Europe services as shown in the graphic below:

Ocean Container Alliance Share Across

Asia to Americas and to Europe by Capacity


(See More Below)


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Shippers Group Says New Approach is Needed

With all that and more going on - the were reports last week that Maersk's next generation of 11 Triple E megaships that will start being delivered next April will surpass the 20,000 TEU capacity threshold for the first time - the Global Shippers Forum has issued a new report that questions the direction the industry is headed.

"It has been clear for some time that the existing business model isn't working for either carriers of their customers," says Forum general secretary Chris Welch. "There is a growing gulf between customers' expectations and quality of service, as carriers focus almost exclusively on operational arrangements and alliance structures."

That concern, as well as the impact of the ever larger megaships and more, is laid out in a new report by the Forum, titled The Implications of Mega-Ships and Alliances for Competition and Total Supply Chain Efficiency: An Economic Perspective.

SCDigest will soon review this new report in more detail, but GSF notes that the move to basically three major alliance groups - from a market that just a couple of years ago was characterized by many individual carriers competing for business and operating independently - "presents real potential competition issues between carriers and for shippers, as independent carriers are forced out of the market or are driven into smaller niche markets."

It adds that "Should the market become consolidated into 6-10 major operators controlling the main trade lanes, GSF believes it would be inevitable that the market share thresholds for alliances and consortia agreements would have to be so low they would be ruled out on competition grounds, with carriers having to compete head-to-head."

The report also questions whether the economics of the megaships are really working out for shippers, ports and other parties besides the carriers.

Sections of the report asking that last question should not come as a surprise. SCDigest reported in March about a presentation made by GSF's Welch at an industry conference, where he said The deployment of megaships "has led to the bunching of vessels, peaks and troughs in cargo handling, terminal congestion and void sailings, piling up costs across the supply chain." (See Container Lines Reap Benefits of Megaships, While Everyone Else See Supply Chain Costs Rise.)

Welch also noted that there are giant traffic jams of drayage trucks at the port of Hamburg, Europe's third busiest port, the result of the average number of container moves per vessel increasing from 2,000 to 2,500 a few years ago to between 6,000 and 7,000 today. That increase in container moves per terminal stop also causes long unloading times in addition to the traffic woes and delays.

So, the new alliances coming on-line - and supposedly designs coming for new megaships reaching the 22-23,000 TEU capacity range - are hardly the end of the story.

More on this soon from Supply Chain Digest.

Are you concerned about the impact of alliances and megaships on shippers? Why or why not? Let us know your thoughts at the Feedback section below.


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