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The proposed merger of Chinese state-owned shipping groups China Shipping and Cosco, and the possible takeover of NOL and its container arm APL by CMA CGM, could lead to a structural shakeup in container line alliances, according to delegates at last week’s Intermodal conference in Hamburg.
Camilla Jain Holtse, competition compliance officer at Maersk Line, suggested that east-west alliances could drop in number from four to three in the aftermath of the current round of M&A activity in the industry.
Other permutations might be a transformation of the Ocean Three into the Ocean Four; the G6 to the G5 and the CKYHE becoming the KYHE.
CMA CMG and China Shipping are currently part of the Ocean Three, Cosco is a CKYHE member and APL part of the G6.
Anthony Woolich, partner at Holman Fenwick Willan said he expected Chinese regulators to approve the China Shipping-COSCO merger without delay, but was not sure what the stance of American regulator, the FMC, or the European Commission would be.
Ms Holtse argued that shippers were already seeing considerable benefits from existing alliances, including her firm’s 2M tie-up with MSC, including receiving “a better product at a lower cost”. The main advantage carriers derived from alliance membership was the “ability to deploy large vessels efficiently, thereby improving utilisation”, she said.
Ms Holtse reminded delegates that there was a long history of vessel-sharing agreements (VSAs) and alliances in the liner industry and new, larger groupings would not affect competition in the market. She argued that alliances provided “frequent sailings and cheap rates”, as cost savings are ultimately passed on to the shipper.
She also said alliances allowed smaller carriers to compete with their bigger peers and added that there was “no evidence of large-scale VSAs increasing freight rates” on any routes.
However, Peter Wolters, sustainability business development manager at the European Shippers’ Council, claimed mega-alliances had resulted in a “hub and spoke overdose”, with a longer lead time for containers and a greater risk for goods.
Mr Wolters singled out the current strategy of blanking sailings to adjust supply and demand, describing it as “plaguing the industry”, and pointed out that most liner reliability surveys were unable to take into account voyages that had been withdrawn.
Cancelled sailings, often at short-notice, have led to containers being rolled-over or transhipped, and details were often poorly communicated by carriers to shippers, causing considerable disruption to the supply chain, said Mr Wolters.
He argued that, with the advent of the big alliances, service quality had declined, with some carriers not being informed by their partners of vessel delays or additional port changes.
He said that there had also been a notable deterioration in other service levels, including delays in answering requests for quotations and errors in bills of lading and invoicing.
Economist Nils von Hinten Reed, managing partner at CEG Europe, suggested that, with the obvious exception of price-fixing, carriers should be allowed to co-operate more closely to improve performance for the mutual benefit of both the container lines and their customers.
He thought that although shippers might say they want a premium service, they had not appeared willing to pay for it, citing the example of the aborted Daily Maersk product.