The Value of Stability within the Alliance Scramble

Source: www.magnates.biz

Earlier this year in April, France’s CMA CGM announced that it would be joining a new carrier alliance next spring. The alliance, known as Ocean Alliance, is newly formed and will include Asian carriers Cosco, Evergreen, and Orient Overseas Container Lines. This decision leaves three currently existing alliances (G6, CKYHE, and Ocean Three) falling short of partners and in need of replacing their members and rerouting their network.

What began as potential merger negotiations between German carrier Hapag-Lloyd and Arab carrier UASC has now appeared to become efforts to form a new alliance, consisting of all the remaining members of G6, CKYHE, and Ocean Three, as well as carrier Hamburg Süd. The landscape of the container market seems to be evolving into a field marked by three major alliances: Ocean Alliance, the unnamed alliance headed by Hapag-Lloyd, and the currently existing alliance 2M.

The 2M alliance between Swiss-based company MSC and industry-leading company Maersk Line was formed last year and is expected to last until 2025. Maersk Line CEO Søren Skou expressed his confidence and relief in not having to partake in this current alliance commotion, stating: “We are pleased that we don’t have a horse in this race right now.” He believes that the alliance scramble will put the 2M alliance at an advantage.

Every time a new alliance is formed, companies must reroute their network of vessels. This additional cost will put increased pressure on the companies as well as their relationships with customers. Skou believes another advantage 2M holds is their alliance size. Despite being the largest alliance by capacity, all decisions will only have to be agreed upon between two carriers. This allows for quicker network reviews that will lead to “improved efficiency and fewer costs”. Whatever the outcome, there is no doubt that this alliance scramble will result in a great shift within the field.

SOURCE: www.shippingwatch.com

Additional Information:

Container Operators China Shipping Group, CMA-CGM Form Ocean Alliance (WSJ)

Maersk Line CEO Sees Advantage in Alliance Commotion (Shipping Watch)

Hapag-Lloyd and United Arab Shipping in Merger Talks (WSJ)

MSC: 2M Stands to Gain from Alliance Shake-ups via Consolidation (JOC)