Shipping line mergers, acquisitions and new alliances have been moving ahead at a pace, both before and after the Hanjin collapse.
So what’s happened, and why? We explore the new alliance landscape.
Even before the Hanjin Shipping collapse it’s been something like an endless game of musical chairs in the global container line industry in recent times, as mergers, acquisitions and new alliances have moved ahead at a breathtaking pace.
Put simply, container shipping is an intensely competitive business. The search for ever lower costs has led to a huge investment in mega containerships of 18,000 TEU and upwards.
However, while the supply of container capacity has grown rapidly, sluggish global economic conditions means demand has not kept pace.
This has meant record low freight rates for shippers, but it also makes it tough for container lines to make a return on their investments. This, in turn had forced shipping lines to review how they are operating, long before Hanjin demonstrated any signs of financial weakness.
The starting point for the realignment was the proposal by the three largest container lines – Maersk Line, Mediterranean Shipping Company (MSC) and CMA CGM – to form a new global alliance which was set to last a decade. However, this planned P3 Alliance came unstuck when it was blocked by competition authorities in China in 2014.
Instead, Maersk Line and MSC joined forces and established the 2M Alliance. Then, later in 2014, CMA CGM, China Shipping Container Lines and United Arab Shipping Company unveiled the Ocean Three Alliance.
All quiet? Not for long! This year we have seen CMA CGM take over NOL, owner of the container line APL; the merger of China’s two largest shipping conglomerates, China Ocean Shipping Company (COSCO) and China Shipping (Group) Company, to form China Cosco; and a proposed merger, currently moving ahead, between Hapag-Lloyd and UASC.
A new Ocean Alliance has been announced, bringing together CMA CGM, China Cosco Shipping, Evergreen Line and OOCL, bringing an end to the Ocean 3 Alliance, while also taking members away from the G6 and CKYHE alliances.
But the ink on this latest agreement wasn’t even dry before Hanjin’s spectacular fall, throwing THE Alliance into chaos and leaving UASC and Hyundai in limbo.
We started 2016 with four global alliances made up of 16 different carriers. Shipping consultant Drewry has predicted that by mid 2017 there will be only three main global alliances comprising 12 carriers at the most, thanks to collapses, mergers and takeovers.