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The mega-alliance rankings should determine the foundation for success, or will other factors play a role?

The long-anticipated announcement last week of the marriage of convenience between ocean carriers CMA CGM, UASC and China Shipping represents “the final piece in the ‘mega-alliance’ jigsaw”, according to analyst Drewry.

The formation of the romantically named Ocean Three alliance, said Drewry in its Container Insight weekly publication, means that most of the east-west tradelanes are “now completely locked down by alliances, with virtually no room at all for independents”.

According to Drewry’s data, the route between Asia and North Europe will be dominated by the proposed 2M alliance of Maersk and MSC with 32% of capacity. That is followed by the CKYHE alliance of Cosco, K Line, Yang Ming, Hanjin Shipping and Evergreen with 26%; the G6 alliance of APL, Hapag-Lloyd, HMM, MOL, OOCL and NYK with 23%, and finally the newly-created Ocean Three with 19%.

But between Asia and Mediterranean ports, the Ocean Three members grab 27% of weekly capacity, behind the 39% of 2M, but ahead of rival alliances the CKYHE with 20% and the G6 with a lowly 8%, and in this case leaving 5% for “others”.

Elsewhere, however, across the world’s second-biggest tradelane between Asia and the US west coast, the market leader is the CKYHE alliance with a 34% share, followed by the G6 with 32%.

This is a relatively weak trade lane for the 2M which if approved by the FMC would have 15% of capacity putting it just ahead of Ocean Three with a 13% share and leaving just 6% for independents.

Drewry argued that the quest for economies of scale and reduced slot costs was the motivation behind the need for even the biggest carriers to form mega-alliances, and in this respect it notes that the Ocean Three alliance will rank second to the 2M in terms of its current fleet of ultra-large container vessels of 10,000teu at 51 ships, compared to the 2M fleet of ULCVs at 75.This is ahead of the CKYHE with 45 ULCVs and the G6’s 41.

However, when the orderbook is included the CKYHE partners jump to second in the ULCV ranking with 88 ships, behind the 2M’s 98; ahead of the 71 ULCVs of the Ocean Three and the 61 slated to be operated by the G6.

Nonetheless, and crucial in the economy of scale table ranking, Ocean Three will figure second with its proposed average size ULCV of 13,213teu; behind the 2M average of 14,792teu, but ahead of the CKYHE and G6 averages of 12,942teu and 12,307teu respectively.

If it passes the regulatory hurdles, the 2M alliance will enjoy a global unit cost advantage over its alliance rivals – based on current fleets and orderbooks – but other factors may determine the success or otherwise of each alliance, Drewry said.

It concluded: “Ultimately the success of each alliance will depend on how these often disparate companies in terms of ownership structure, nationality and culture can operate together.

“How quickly they are able to react to market developments is also a significant factor.”

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  • Ricky Forman

    September 15, 2014 at 2:11 pm

    Can unit costs be reduced forever? What happens when they cannot? Shouldn’t some focus be on increasing revenues also?

  • Suresh

    October 06, 2014 at 6:12 am

    The increasing size of mega vessels is already preventing these vessels from calling at major ports of call.The only option is transhipment, and these are causing containers to be handled at multiple ports, increasing shipment transit times and possibility of cargo damages.
    Will shippers continue to accept this?

  • Mike Wackett

    October 06, 2014 at 1:20 pm

    Depending on who you talk to Suresh, the answer is: Yes, as long as the price is right.