More Shippers Band Together to Stay Afloat

Container carriers are joining forces to weather the rough economic waters—and to avoid the perfect storm that hit Hanjin.

Faced with declining profits due to double-digit dips in freight rates and slow trade, carriers have formed alliances to capitalize on competencies and eliminate inefficiencies. In 2016, the industry saw losses exceeding $800 million, $1.6 billion and $1.2 billion for each of the first three quarters, respectively, according to Drewry Maritime Research.

The latest announcement comes from Hyundai Merchant Marine, which will partner with fellow Korean lines Heung-A and Sinokor Merchant Marine to form HMM + K2 consortium, and operations are expected to begin in March. The deal will cover Japan, China and South East/West Asia. The deal will include vessel sharing, slot exchange and slot purchase agreements, with the goal of improved cost savings and customer service.

This announcement is the latest in a slew of agreements between shippers, including the 2M, Ocean Alliance and THE Alliance.

These agreements worry some customers that foresee opportunistic moves like price fixing now that fewer entities control more of the shipping pie. For instance, 2M, which includes Denmark’s Maersk Line and Mediterranean Shipping Co. of Geneva, represents approximately 30 percent share of the overall market, according to Alphaliner. CMA CGM, Cosco, Evergreen Line and OOCL—which collectively make up the Ocean Alliance, which launches in April—represent the third, fourth, fifth and eighth largest carriers in the world. Meanwhile, THE Alliance, which is also scheduled to take effect in April, includes Hapag-Lloyd, “K”Line, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming.

Related Article
Fabric Maker Taiwan Paiho Headed to Vietnam

Consolidation also took the form of acquisitions recently when Maersk Line purchased Hamburg Sud, the seventh largest operator, for $4 billion.

While members of each of these alliances tout the improvements customers will benefit from, others foresee possible issues. Peter Friedmann, executive director of the Agriculture and Commodities Transportation Coalition, has said the ripple effect could be larger ships, less competition, fewer sailings and more stress on terminals and labor.

The Wall Street Journal pointed to the so-called Triple E, the megaships that can carry up to 18,000 TEU, as one result of these deals, which cause port congestion thanks to the need for special infrastructure and equipment and reduce the need for more frequent sailings, giving shipping customers fewer options.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.
Log In Register

Recent News