Friday, May 13, 2016

Once Again the Container Shipping Alliances Throw Freight Interests Into a Flat Spin

It's All Change as Confusion Rules the Waves
Shipping News Feature
WORLDWIDE – In the wake of the recent major tie-ups in the container shipping industry, Nippon Yusen Kaisha, Hanjin, Hapag-Lloyd, K-Line, MOL, and Yang Ming have agreed to create a new alliance covering all East–West trade lanes. A binding agreement has been concluded by all partners and ‘THE Alliance’ (no reticence about the name then) is scheduled to begin freight operations in April 2017, for an initial term of five years, subject to approval of all relevant authorities.

Last month, COSCOCS, CMA CGM, Evergreen Line, and OOCL announced plans to create the Ocean Alliance, a large collaboration to directly compete with the Maersk and MSC VSA (2M) tie up. This meant the disbanding both the G6 and the CKYHE alliances and leaving them a mere shell of what they previously were. The opinions of the various regulators on the shenanigans can only be guessed at.

G6 consists of OOCL, APL, Hapag Lloyd, HMM, MOL, and NYK and currently holds a 16.9% of the global market share. OOCL will be joining the Ocean Alliance along with APL after the parent company, Neptune Orient Lines (NOL) is in the process of merging with CMA CGM. With Hapag-Lloyd, MOL, and NYK joining forces, this leaves Hyundai Merchant Marine (HMM) in more trouble than it’s currently in. HMM is currently in the process of restructuring but has said that it will start talks to enter the THE Alliance in June once the company’s ‘business normalisation’ is completed. HMM is reported to about to become a subsidiary of the South Korean state-owned Korea Development Bank in an effort to keep the container shipping line from sinking.

Conversely, the break-up of the CKYHE alliance is much cleaner. CKYHE is made up of COSCO, K Line, Yang Ming, Hanjin, and Evergreen and holds 16.4% of the market. COSCO and Evergreen will join Ocean Alliance, and K Line, Yang Ming, and Hanjin will collaborate in the THE Alliance.

The new partnership will aim to build one of the leading networks in the container shipping industry combining approximately 3.5 million TEU which reaches 18% share of the global container fleet capacity. All six partners operate advanced and competitive fleets with more than 620 ships in total. The new alliance will cover all the East-West trade lanes namely, Asia-Europe / Mediterranean, Asia-North America West Coast, Asia-North America East Coast, Transatlantic and Asia–Middle East / Persian Gulf / Red Sea.

Ongoing discussions between Hapag-Lloyd and UASC are progressing according to plan, although an agreement on business combination has not yet been reached and will in any event be subject to regulatory approvals. It is anticipated that UASC will become part of the THE Alliance, which will increase the overall alliance capacity to more than 4 million TEU and set to push the alliance to over 20% of the market share.

More details on the services and port rotations will be published when all necessary preparations are finalised. Who’d be a regulator?