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.
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.
How Amazon may strip Whole Foods of its touchy-feely ethos—and why that's a good thing—had how cold brew proves you can teach old dogs new tricks.Read more
Loftex Home and GHCL sign CertainT licences, Hollander Sleep Products Buys Pacific Coast Feather and Oeko-Tex certifies Tuft & Needle.Read more
The National Retail Federation continues to lobby Congress with regards to the border adjustment tax, reiterating its claim that it would shift corporate tax savings to consumers.Read more
NRF announced new board members this week, while Topshop hired a new CEO and Macy's stepped up its off-price game with a new executive.Read more
Fashion can’t escape what’s happening in the world whether it wants to or not, and for the Autumn/Winter 2018-19 season, textiles will look to balance all that’s been upended.Read more
The Chittagong Port Authority has taken steps to alleviate the congestion situation at Bangladesh’s top port, but no comprehensive plan is in the works to fix what has been a long-term logistical problem.Read more
Looking to boost cotton quality and exports, Egypt’s Ministry of Trade and Industry has signed a cooperation protocol with United Nations Industrial Development Organization (UNIDO) and the Italian Development Cooperation.Read more