Three shipping alliances to control

container shipping

Three shipping alliances to control

container shipping

Tuesday, 11 April 2017

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 alliances 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. Lloyds 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 MSCs 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 isnt 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 Internationals 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 carriers mega ships and those of
partners in the Ocean Alliance that launched on April 1. The CMA
CGM-PSA Lion Terminals 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 groups 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 worlds 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 governments 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 states share of the
Southeast Asia transhipment market, the worlds 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 Westports 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), Indias 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).)
Posted by Thavam