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MARCH 30, 2017

JOC: Scope of Carrier Alliance Changes Comes into View

New analysis of the vessel sharing agreements has revealed the scope of the changes that are going to hit the market this weekend, while highlighting again the cut back in routes, port calls, and options for shippers.

From April 1, 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 CargoSmart studied the networks of the three alliances and made some interesting findings. For instance, nearly 70 percent of the alliances’ direct routes will be operated by one alliance, led by 2M that will control 31 percent 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 percent, and while the percentage of services using the Panama Canal will remain the same, more than 50 percent will be operated by the Ocean Alliance.

A total of 60 percent 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 percent of the routes to be offered by the Ocean and THE alliance will change from direct to transshipment. Fewer direct route options and more transshipment could lead to a greater chance 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 BCO books with different carriers. For example, 37 percent 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 5 a week to 4. Shanghai-Rotterdam from 6 to 5, and Shanghai-Antwerp will decline from 5 sailing days a week to 3.

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 percent.

The size of vessels being deployed on the Asia-US trade was also rising. A spokesman for CargoSmart said based on the proforma schedules provided by the carriers through March 17, most of the top US ports would have fewer visiting vessels for each alliance service, while the average vessel size by 20-foot-equivalent unit (TEU) capacity for the alliance services will increase at most of the top US ports.

Michael Dye, group managing director for non-vessel owning common carrier CL Worldlink, said it was too early to tell if the new alliances will be a benefit or bane to the industry.

“I am always concerned about too little competition in any industry and ours is no different,” he said. “When you look at some trade lanes there are only two carriers operating direct port to port services. I realise this is a factor of supply and demand, but as a consumer I want choices and the more the better especially when it comes to equipment availability and scheduling.

“In today's marketplace the challenge is putting together a package that is both competitive and meets the client's needs in terms of direct service, transit time, etc. as we still seem to be mired in the non-compensatory pricing environment. Perhaps this will change with the new alliance structure, but doing so and still having healthy competition remains to be seen.”

With such a complete global restructuring of the container shipping networks, there is huge concern among shipper groups and forwarders that the new mega alliances will create significant disruption to their supply chains.

Chris Welsh, secretary general of the Global Shippers’ Council, said the problem was that in the formulation of the new market structure, the customer was largely absent from the discussion, with the focus on what works for the container lines.

“There is little differentiation in price and service offering by carriers. Shippers are seeing less choice and less competition. We all need to be worried about that,” he said.

Source: http://www.joc.com/maritime-news/new-alliance-analysis-highlights-sea-change-facing-shippers_20170330.html