Catching Fire on the Sea: International Shipping Moves & Counter Moves

 In green, International Shipping, P3 Network

This is the follow up to last week’s blog, Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance.

hunger games international shippingIn an arena of oceans and seas, giant ships filled with thousands of cargo containers sail from continent to continent. They’re owned and filled by huge shipping companies known as carriers. Forming alliances and making moves and counter moves, the carriers battle for international shipping dominance. How many carriers will survive is unknown.

Let the games begin!

Today we look at the moves and counter moves the carriers and their alliances are making to rebound from billion dollar losses and beat out the competition in the world’s cargo shipping industry.

Let’s start with the favorites, the carriers who would be the Careers in the Hunger Games: Maersk, Mediterranean Shipping Co., and CMA CGM. Together, these three largest carriers in the world, have formed the P3 Alliance.

Of the three carrier alliances–the G6, CKYH, and P3–the P3 is the latest to form, but it is also making the most waves. This alliance was so recently formed and announced that it has not yet even been approved by regulators.

Still, everyone seems to be moving forward as if approval is a foregone conclusion.

In an article from the Wall Street Journal by Costas Paris about the U.S. Federal Maritime Commission, the European Union’s Competition Commission, and China’s Transport Ministry meeting in regards to the alliance quoted one of the people with direct knowledge of the matter as saying:

“The regulators have determined that the P3 isn’t a merger, but an alliance. This means that it will probably be approved, but it will include clauses to protect parties like cargo owners, fuel providers and smaller competitors from price fixing and unfair competition.”

Many importers, exporters, and freight forwarders are worried about how this alliance will affect freight rates. But it’s the other carriers who have the most to worry about an alliance from the three biggest carriers in the world.

According to a Supply Chain Digest article, the “2.6 million TEU total [P3 ships to be employed] represents just under 15% of the total global container fleet.” That’s a significant amount of the world fleet, but may not sound that intimidating.

However, when realizing the way these ships will be used in some of the biggest shipping lanes in the world, it quickly becomes clear just how powerful a force the P3 Alliance could be. Hellenic Shipping News reports:

“The capacity shares of the P3 alliance (Maersk, MSC, CMA CGM) in the Asia-North Europe trade would reach 41% – much more than the share of the current biggest alliance, the G6 with about 22%.”

So the move of the P3 Alliance is a big one. And the G6 Alliance is quickly making a counter move.

The Journal of Commerce reported on December 3rd:

The G6 Alliance unveiled plans today to expand into the trans-Atlantic and Asia-U.S. West Coast trade lanes in a widely expected response to the proposed P3 Network partnership between the world’s three largest carriers, Maersk, Mediterranean Shipping Co. and CMA CGM.

The G6 carriers — Hapag-Lloyd, NYK, OOCL, Hyundai Merchant Marine, APL and MOL — will deploy 240 container ships serving 66 ports in Asia, America and Europe.

The alliance plans to complete the expansion of services by the second quarter of 2014, pending regulatory approval, to coincide with the launch of the P3 network on the Asia-Europe, trans-Atlantic and trans-Pacific routes.

So the three biggest carriers in the world form an alliance then the current G6 Alliance expands and combines more of its services. It quickly becomes apparent that competition seems to be shrinking as Hellenic reports:

…if the G6 alliance carriers (New World Alliance and Grand Alliance) merge all their transatlantic services, they will have a share of about 46% of total transatlantic capacity, more than the current biggest group, MSC with about 16%.

…just two carrier alliances (P3 and G6) could control more than 80% of transatlantic capacity and more than 60% of Asia-North Europe capacity.

Then there’s the CKYH Alliance (which has also been called the “Green Alliance”). There have been several stories circulating about Hanjin Shipping (the “H” in the CKYH Alliance) planning to invite Evergreen Marine Corp. to join that alliance.

Evergreen container shipEvergreen Marine Corp. is the China’s largest container shipping company and would be a strong addition to the CKYH Alliance. Evergreen has worked with this alliance some in the past, so a pretty strong relationship already exists there.

An article from Taipai Times reports that Evergreen is considering joining the CKYH Alliance and paints a picture of Evergreen as a shipping company upgrading its fleet with a bright outlook for 2014.

Evergreen joining CKYH would be one more way in which the international shipping world shrinks into a field of alliances.

With each story, every move and counter move, we see alliances trying to strengthen themselves and grow to take a larger chunk of the market. How will this world of alliances in international shipping affect you, the shipper?

Check out our blog next week where we look at that question.

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