It is often assumed by the pseudo-sophisticated that today’s shipping alliances that unite ocean carriers into three rival groups are simply new names for the old conferences and consortia of old.
Far from it. The conferences that were banned in Europe in 2008 and survive as a shadow of their former selves in transpacific stabilisation agreements, concerned themselves with rate setting. The EU has banned this activity for more than a decade.
Ironically, while shipping lines can no longer collude on price, despite European Commission raiders twisting themselves into pretzels in vain attempts to prove otherwise, carriers have had to co-operate far more than ever in ways regulators never imagined.
Now it appears that carriers must contemplate even greater co-operation if they are to survive the crisis of overcapacity and a growing mood of protectionism that afflicts them all. To do this, they have forged themselves in three mega-alliances along the main high-value Asia Europe trade lane, which now includes the east coast North America with implications for Red Sea, North African and southern European wayports via Suez.
A review of forces reveals the biggest contender is the Maersk-led 2M Alliance. Maersk now includes Hamburg Sud, which joins the world’s second biggest carrier, the Swiss Italian Mediterranean Shipping (MSC) with its slot-sharing deal with Hyundai Merchant Marine (HMM), a very junior partner with its 20 per cent transpacific market share.
Next is the Ocean Alliance, led by French shipping giant CMA CGM, which now includes its recently acquired unit Singapore’s APL, China’s Cosco, Taiwan’s Evergreen and Hong Kong’s Orient Overseas Container Line (OOCL), with the biggest share of the transpacific trade at 40 per cent.
Then comes THE Alliance of Japan’s MOL, NYK and “K” Line, all of which are to merge their box operation into a single unit next year. Also a member is German shipping giant Hapag-Lloyd, which includes the 2016 merger of United Arab Shipping Co (UASC). These are joined by Taiwan’s troubled Yang Ming hard hit by Korea’s Hanjin Shipping insolvency, with its 27 per cent transpacific.
The realignment of the four global vessel-sharing alliances into three larger and more powerful alliances can be viewed as the shipping industry抯 latest attempt to cut costs and increase leverage in a cutthroat environment, says IHS Media. The impact of these changes on ports, marine terminal operators and beneficial cargo owners must not be overlooked.
Just as US Federal Maritime Commissioner William Doyle has said repeatedly over the years, it is not clear on whether these vessel-sharing agreements will prove to be a good to beneficial cargo owners and consumers. So regulatory eyes are peeled for abuse on both sides of the Atlantic.
But the Federal Maritime Commission (FMC) has yet to reject an alliance, though China quashed the proposed deal between Maersk, MSC and CMA CGM, causing the P3 Network’s dissolution and the creation of the 2M Alliance instead.
In the case of the THE Alliance, Mr Doyle said he didn’t give his vote of approval until it scrapped language that would allow them to jointly contract with third-parties. The commissioner has successfully rejected allowing such practices in the original proposals from 2M and Ocean Alliance members.
“This follows the framework I have supported whereby alliance members must negotiate independently with American businesses such as tugs, barges, stevedores, chassis providers, container equipment lessors, bunker suppliers and other third party service providers in the United States,” Mr Doyle said. “On commercial matters the parties can gain significant efficiencies by jointly discussing operational matters.”
Indeed, that is where the area of co-operation will take place in all likelihood. As carriers limit port pairs, there will be fewer choices for BCOs. There will no way of knowing that shipments they booked with one carrier will not go with another because of various slot-swapping that will come into force April 1 when the new alliances commence operations.
Ports will experience feast or famine. Terminal operators, however, could feel the biggest residual impact of the alliance reshuffling. The alliances, and the bigger ships they deploy, will require taller cranes, more yard space, expanded gate capacity and given the massive dumping of cargo from mega ships 24/7 operations to clear the deck before the next berthing window opens.
Will terminal operators have to pay these costs as alliances “spreading the pain” to the terminals, as Philip Damas, director of supply chains advisors at London’s Drewry Maritime Research suggests they might?
Perhaps, but not necessarily. What has happened is that the vessel sharing agreements, at least as far as FMC Commissioner Doyle sees technical cooperation as acceptable as long as there is no collusion on price on what each member charges or pays for services.
This leaves plenty of scope for operational cooperation that would be closer than anything experienced in the past under the old conference system where cooperation was largely limited to price.
Maritime Hall of Famer Ron Widdows, now executive chairman of American Intermodal Management and chairman of the World Shipping Council, once said: “If you don’t get paid a nickel more to improve service, why do it?”
Mr Widdows answered his own question in a narrow technical sense. To this end, he advised carriers lines within each alliance to break down common barriers of mistrust and work more closely together to share cargo data and align their information systems.
But the short answer is customer service. Not because it is nice to be nice to customers, but because the alliances that make a success of this new world order will be more like integrated companies offering as close to door-to-door service as they can.
Bringing greater benefit to member lines joined in what is likely to become rival supply chains linked to each alliance would be strengthened by the transmission of shipment data ASAP. This would lead to greater efficiencies for terminal operators, truckers and intermodal carriers.
Terminals are already investing in costly upgrades to accommodate mega ships to handle cargo surges they generate. Getting as much information to all elements in an alliance’s supply chain as soon as possible would benefit all and make that alliance more attractive than the next one.
This may well mean the integration of terminal handling charges and onward carriage costs into a transparent pricing system readily compounded and computable through an online joint booking and billing agencies like Hong Kong’s CargoSmart or New Jersey’s INTTRA, offering shippers choice of comparative pricing from each of the alliances and their partners in the supply chain.
Because the newly merged carriers are still working out their internal operations while they meet with their counterparts in the new alliances, there is much to be settled, but it is becoming clear that if carriers are not competing with each other within the vessel sharing agreements, they will likely face rivalry from the other alliances – and as that battle cannot be over price, the new game to be won is customer service.
Source: www.schednet.com