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Saturday, October 21, 2017

Full Ahead: New Generation of Carrier Alliances

May 8, 2017

  • Photo: Port of New Orleans
  • William P. Doyle (Photo: FMC)
  • Photo: Port of New Orleans Photo: Port of New Orleans
  • William P. Doyle (Photo: FMC) William P. Doyle (Photo: FMC)

Full ahead: new generation of carrier alliances and slot/vessel sharing arrangements; SM’s (Bullet) Line; FWE for Hanjin.

 
On April 1, 2017, the new generation of carrier alliances became reality. In the run up to April 1 there was a flurry of activity with ocean carriers entering into arrangements with other carriers in competing alliances and with other carriers not signatory to any of the alliances. 
 
The New Generation of Alliances
The 2M Alliance is an existing alliance made up of Maersk Line and Mediterranean Shipping Company (MSC). Maersk is scheduled to take over Hamburg Süd by the end of 2017; Hamburg Süd will be folded into 2M through Maersk. 
 
The OCEAN Alliance is made up of CMA CGM, and its recently acquired American President Line (APL), Orient Overseas Container Line (OOCL), Evergreen and COSCO Shipping Lines Co., which consists of the now merged China Ocean Shipping Company (COSCO) and China Shipping Container Line (CSCL). 
 
THE Alliance is comprised of the big three Japanese carriers, Mitsui O.S.K. Lines, Nippon Yusen Kabushiki Kaisha (NYK Line) and Kawasaki Kisen Kaisha (“K” Line), Hapag-Lloyd, United Arab Shipping Company (UASC) and Yang Ming Transport. The three Japanese carriers planned on combining their container operations into one company by April 1, 2018. In addition, Hapag-Lloyd and UASC are scheduled to merge by May 31, 2017. 
 
Flurry of Activity: inside and outside of Alliances
The ocean carrier alliances are not necessarily as rigid as one would think. Indeed, ocean carriers often enter into vessel and slot sharing agreements with members of other alliances or with carriers that are not party to any alliances. A review of the recent activity affecting the U.S trades is highlighted below: 
 
• Maersk/MSC/HMM Strategic Cooperation Agreement:
In the last week of March, the FMC unanimously cleared the strategic cooperation agreement between Maersk, MSC and Hyundai Merchant Marine (HMM). This arrangement will be known as the “Maersk/MSC/HMM Strategic Cooperation Agreement.” With respect to the United States, HMM may exchange or purchase slots on the East-West 2M Loops. Maersk and MSC are entitled to take slots on Far East-U.S. West Coast loops. HMM will not be party to any of the three alliances coming on line April 1. The “2M” Alliance itself is not party to this strategic cooperation agreement. For clarification, the term “2M” generally applies to the FMC filed agreement known as the “Maersk/MSC Vessel Sharing Agreement.” Indeed, in the Maersk/MSC/HMM strategic cooperation agreement there is no reference to “2M” anywhere in the agreement.
 
• COSCO, CMA CGM, PIL, Wan Hai Transpacific Slot Exchange 
OCEAN Alliance members COSCO and CMA CGM will kick-off a slot exchange arrangement on the South China – U.S. West Coast transpacific services. This service will be secured through slot exchanges with Taiwanese company Wan Hai Lines and Singapore based Pacific International Lines (PIL). Wan Hai and PIL are not members of any ocean carrier alliances. 

• CMA CGM, APL, Evergreen, OOCL, NYK – Japan to U.S. Slot Exchange
The OCEAN Alliance and THE Alliance members find synergies. The OCEAN Alliance members CMA CGM (APL), Evergreen and OOCL are forming arrangements with THE Alliance members. OCEAN members CMA CGM (APL) and Evergreen will offer Japan – U.S. West Coast service on OOCL vessels and on vessels operated by THE Alliance member NYK. This will be an interesting service to watch as it appears to be the first type of service comprising many of the members from both THE and OCEAN.

• CMA CGM to go with THE Alliance Members in N. Europe – West Coast U.S. Trade
OCEAN Alliance member CMA CGM has been busy making deals with carriers regardless of alliance affiliation. OCEAN’s CMA CGM has entered into an arrangement with all five members of THE Alliance. Thus, CMA CGM will purchase space on THE ships operated by Hapag-Lloyd, K Line, MOL, NYK and Yang Ming in the Northern Europe – U.S. West Coast trade. This service will leave Europe, call in Savannah and then utilize the Panama Canal on its way to ports on the U.S. West Coast. 
 
• CMA CGM, Hapag-Lloyd Mediterranean to U.S. Gulf Coast Service
OCEAN Alliance member CMA CGM and THE Alliance member Hapag-Lloyd will operate a Med Gulf Express service. This offering appears to be an arrangement where CMA CGM would offer its service to the trade through a slot agreement with Hapag Lloyd. 

• OOCL Beefing-up Fleet Ahead of OCEAN Alliance Launch
Hong Kong’s OOCL was very active in the chartering market getting ready to have ships in place for the April 1st launch of the OCEAN Alliance. Over the past couple of months OOCL has charted six 10,000-plus TEU vessels from Greece-based Costamare Shipping Company and Danaos Shipping and Hong Kong based Seaspan Corporation. In addition, OOCL has chartered two 8,000-plus TEU vessels from its OCEAN partner CMA CGM. OOCL expects to take delivery of six 21,000-plus TEU vessels during the second half of 2017. The aforementioned charters appear to be a transitional strategy providing tonnage until its new container ships are delivered. 

SM Line Enters the Market
Rising from the ashes of Hanjin Line, SM Line will launch its China Pacific Express service in mid-April. SM will go it alone without any alliance affiliation utilizing a bullet line service to Long Beach. SM Line will operate five 6,655 TEU vessels from Asia directly to Long Beach, California’s SSA Terminal at Pier A. SM Line acquired the five ships from creditors of the failed Hanjin Line. SM Line is an affiliate of SM Group, a South Korean based manufacturing, construction and services conglomerate. SM Group is also the parent company of Korea Line. 
 
Hanjin Line – Finished with Engines – FWE!
Hanjin is finished, a sad story for the world’s seventh largest container carrier. The last ship in the Hanjin fleet was sold in a sheriff’s sale on March 1, 2017. The entire fleet of 97 container ships operated by Hanjin have been sold or returned to their owners as of March 1, 2017. Many of the ships are inactive. However, a review of who will deploy some of the ex-Hanjin ships includes:
  • SM Line: eight ships
  • OOCL: three ships
  • Yang Ming: one ship
  • Maersk: three ships
  • Hapag-Lloyd: two ships
  • Zim: one ship
  • MSC: three ships
  • MOL: two ships
  • Simatech: one ship
 
On April 1, 2017, the new generation of ocean carrier alliances kicked off. Stay tuned for what comes next! 
 

The Author
William P. Doyle is a Commissioner with the U.S. Federal Maritime Commission. The FMC, among other things, regulates liner companies, ocean transportation intermediaries and marine terminal operators. 

The thoughts and comments he expresses here are his own and should not be construed to represent the position of the Commission or his fellow Commissioners.
 
 
(As published in the March/April 2017 edition of Maritime Logistics Professional)
 
Nippon Yusen Kabushiki KaishaSeaspan CorporationFMC