This year marks some major changes within the shipping carrier industry. A shake up in shipping alliances throughout 2016 resulted in three prominent Vessel Sharing Agreements – two of them brand new – and, taking effect this month.
While you should expect fierce competition from these three powerful, but equal, carrier groupings, we are focusing on one of the newer partnerships, The OCEAN Alliance, and its potential industry impact.
The OCEAN Alliance
The OCEAN Alliance brings together the recently formed China Cosco Shipping with Evergreen Line, CMA CGM, and Orient Overseas Container Line (OOCL) in a vessel and slot sharing agreement. Offering more than 40 global services and 498 port calls connecting markets in Asia, Europe, and the United States, this new alliance kicked off in April and is set to last for five years.
CMA CGM is the major player in this operational alliance, bringing 119 of the 323 ships available to the table. The carriers within this agreement believe it will bring significantly improved services to all customers and increased access to a vast network of markets spanning the globe.
Service networks in the alliance will cover the Asia-Europe, Asia-Mediterranean, Asia-Red Sea, Asia-Middle East, trans-Pacific, Asia-North American East Coast and trans-Atlantic trade lanes. Boasting a fleet of 323 container ships with an estimated total carrying capacity of 3.5 million twenty-foot-equivalent units, the members plan to provide some of the most comprehensive service coverage available.
The trans-Pacific Market will see the largest coverage by the OCEAN Alliance with 20 loops, 145 weekly calls, and 52 ports. The Asia-North Europe market will be the second biggest focus area of the alliance with 6 loops, 79 weekly calls, and 31 ports.
The realignment of the original four VSAs (2M, G6, CKYE, and O3) into three shipping powerhouses represents a combined market share of 88% of the Asia-North America trade routes. The OCEAN Alliance has the largest market share at 40%, but the remaining two alliances are just as competitive.
Includes Hapag-Lloyd, the combined J-3 lines (NYK, “K” Line, and MOL will merge into one liner in 2018) and Yang Ming. It will offer 16 weekly services spread over the Pacific Southwest, Pacific Northwest and all-water services to the East Coast. THE Alliance will have a 27% market share of the trans-Pacific trade routes.
Includes Maersk (which is acquiring Hamburg Sud) and Mediterranean Shipping Co. as well as a slot-sharing agreement with Hyundai Merchant Marine. It will have a 20% market share in the Pacific.
Outlook still hazy
This is the first time in history that almost every mega alliance is being simultaneously reworked. April 1st was a big day for the industry, marking the beginning of new route and terminal operations all over the world.
There will undoubtedly be some growing pains as railroads, truckers, equipment providers, BCOs, and terminal operators learn to work together within this new operational environment. While it will take some time for the partnerships to find their rhythm, the clock is ticking as July (the beginning of the industry’s busiest peak season) quickly approaches.
For BCOs, there may be fewer route choices and no guarantee that the shipments they book with certain carriers will travel on those vessels due to several slot-sharing agreements that have been put in place this month. Rate changes could take place as the shipping environment becomes more competitive and cargo capacities may quickly shift from one port to the other depending on new route rotations and freight rates.
At TOC International, we believe that regardless of the shipping restructure, our commitment to clients remains the same. We strive to stay up-to-date on all route changes, schedule changes, and rate fluctuations because helping you receive reliable shipping service is our top priority. As we make sense of the new alliance networks, we plan to maintain a diverse portfolio of carriers that manages risk and lowers your overall spend. That’s our pledge to you.