News / Pressure of the mega-alliances is forcing rivals out, or towards more rationalisation

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The proposed P3 network and the reaction from an extended G6 grouping are increasingly forcing non-aligned carriers such as Zim, and even the newly-enlarged CKYHE alliance, into a backs-to-the-wall strategy to compete and survive.

As expected, the G6 was yesterday given the green light for its expansion into the US trades by the Federal Maritime Commission (FMC).

Although smaller than the P3, the G6 has the advantage that it will be in a position to start its revised service pattern in the second quarter, while its rival must wait for Chinese approval before its planned launch in the second half of the year.

Meanwhile, there is no further news on the progress of negotiations on United Arab Shipping Company joining the CKYHE – an attractive proposition for this alliance, given UASC’s orderbook of 18,000teu “LNG-ready” ships, although the line’s chief executive, Jorn Hinge, has made no secret that it will play hard-to-get in the alliance beauty contest.

However, debt-ravaged Zim is unlikely to fulfill its wish to join an alliance while its financial restructuring continues. It has fallen into retrenchment mode and is reportedly set to terminate its Asia Europe Express (AEX1 ) service in April, which it operates on a vessel sharing basis with China Shipping Container Lines (CSCL) on a 10-vessel loop.

But according to CSCL’s AEX1 itinerary, Zim currently contributes only one vessel to the loop, the 10,062teu Zim Rotterdam, which is scheduled to discharge and load in Antwerp, the final north European port on the service, on 1- 2 May.

A source close to the operation told The Loadstar he was not sure what would happen thereafter, but expected the vessel to be replaced by a CSCL ship in Asia towards the end of May.

Zim’s departure would leave CSCL operating the AEX1 on its own, and given the line’s $400m net loss in 2013, its political masters in Beijing will be feeling increasingly uncomfortable against the pessimistic outlook for supply and demand, and freight rates.

There has been little public development since the two state-owned shipping groups, CSCL and Cosco, signed a “strategic co-operation agreement” on 13 February. This was open to interpretation and may have been drafted more to appease Beijing, with little commitment to actual consolidation.

However, with Cosco in 2013 avoiding a third consecutive year of losses, and thus an embarrassing delisting from the Shanghai stock exchange, Beijing may now be obliged to force the issue.

Moreover, CSCL’s rumoured joining of the CKYHE alliance would only go a part way to improving the carrier’s unit cost base; while a merger with its compatriot could allow the combined entity automatic CKYHE membership and would be a win-win for Beijing and the members of the alliance.

The emergence of the P3 alliance, incorporating the three biggest container lines in the world, is proving a game-changer, set to trigger arguably the biggest shake-up and rationalisation in container liner shipping in the industry’s 50-year history.