News / Alliance reshuffles could pave the way for new rate war on ex-India trades

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For westbound container trades out of India, the potential effects of extra capacity coming from new container shipping alliances could reverberate with greater commercial impact on North/West India-North Europe routes, as competition heightens, local market pundits believe.

But it all boils down to one critical question – are there enough vessels available for alliance members to provide scheduled weekly rotations as the longer transits around the Cape of Good Hope continue?

MSC and the CMA CGM-Hapag-Lloyd consortium have been the market share leaders on the tradelane, with the latter’s decades-long vessel-sharing agreement (VSA) now to be split apart in the context of network developments tied to the Gemini alliance between Maersk and Hapag-Lloyd.

Maersk has now unveiled a new loop, known as ME1, for coverage out of West India for the European market, which by volume remains India’s top export destination.

“Maersk is aiming to regain the market share it had lost after discontinuing its previous direct service to North Europe in 2020,” a Mumbai-based shipping analyst told The Loadstar. 

The reintroduced ME1 has been designed with direct stops on a port rotation of Nhava Sheva-Mundra-Jebel Ali-Salalah-Port Tangier-Rotterdam-Hamburg-London Gateway.

However, Maersk also has a new aspirant to deal with – the Premier Alliance comprising ONE, HMM and Yang Ming, on top of CMA CGM’s entrenched Epic service, operated jointly with Cosco.

The three-member Asian liner group will launch IOX (Indian Ocean Express), on a Cape of Good Hope-based rotation of Karachi-Hazira-Mundra-Nhava Sheva-Colombo-London Gateway-Rotterdam-Hamburg-Antwerp-Karachi.

However, the indications are that tonnage will be a challenge for them.  “ONE is already struggling with sailing gaps in the schedule of its WIN [West India-North America] service,” a freight forwarder said.

“So, IOX is unlikely to be a dynamic trade disruptor in the immediate term, more so as there is no clarity on vessel contributions and space allocations,” the source added.

At the same time, as global trade conditions remain volatile, line managers seem to have some commercial strategies in place. “Carriers have already started reaching out to customers to build their contracted cargo base,” one forwarder noted.

Additionally, sources estimate carriers will need no less than two sailing cycles for a return to the Suez route, meaning five to six months, if or when that becomes a reality.

And they added that even a mildly oversupplied market with no marked demand growth could cause a ruinous rate war among carriers seeking to fill capacity.

Spot rates on India-Europe trades have weakened in recent weeks, after a strong rebound seen through July, and now hover at around $4,000 per feu from Nhava Sheva to London Gateway or other base ports in the region.

For North Europe and Mediterranean cargo out of South India, CMA CGM has a VSA with MSC, known as NEMO, featuring weekly calls at Ennore port, near Chennai.

“We are closely watching the competition,” one senior CMA CGM (India) executive told The Loadstar. 

“We are not anticipating a rate collapse as dynamic capacity will continue to remain disrupted,” the source added.

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