16 August 2023 (Lloyd's List) - THE current system of container alliances may have to be reformatted in the years ahead on account of political tensions and regulatory pressure, two leading shipping lawyers have argued.
The comments from HFW partners Anthony Woolich and Matthew Gore come after a similar warning from Vespucci Maritime chief executive Lars Jensen at Journal of Commerce’s TPM conference in Long Beach earlier this year.
Within the sector itself, the break-up of the 2M grouping of Maersk and MSC — which will be discontinued from January 2025 — is already being widely heralded as a harbinger of change. Competition watchdogs may not be inclined to give either of the big two, or rapidly-growing CMA CGM, permission to swallow up middle-ranking players.
South Korea’s HMM is up for sale, but no major carriers are showing real interest in the company as a consolidation play and it is likely to end in the hands of local non-shipping interests. Other potential game-changers include growing strains between China, the home of Cosco, and Taiwan, the home of Evergreen. Both companies are members of the Ocean Alliance.
“It will be interesting to see what will happen with the alliances. 2M will be terminating in a couple of years, and it will be interesting to see the effect that has,” said Woolich. “We read about tensions in the Ocean Alliance, in terms of Cosco looking to grow its fleet significantly and increasing its capacity in US-Asia routes. You’ve got Cosco in the same alliance as Evergreen, China and Taiwan.
“The Ocean Alliance agreement can continue until 2027. But that doesn’t mean it will continue that long if the constituent members wanted to do their own thing.”
The Alliance — which alongside Hapag-Lloyd, Yang Ming and HMM — also includes the three main Japanese carriers, NYK, MOL, and K Line, as part of Ocean Network Express. ONE is already effectively operating as single entity, under a single chief executive.
If the alliance system does have to reconfigure, the question is whether constituent members regard themselves as strong enough go their own way. MSC, Maersk, CMA CGM and Cosco — who are all opting for vertical expansion into terminals and logistics — may feel able to go it alone more easily than other players. The onus will then be on middleweights to show how they can attain similar economies of scale. Should they opt for mergers, the well-organised shipper lobby may push regulators to step in.
While shipping is not a particularly concentrated industry, competition issues need to be considered on the basis of individual routes. The US-Asia trade is much more likely to be of concern to the American or Asian authorities than it would be to the European Commission. On the other hand, Europe-Asia is of more concern than it would be to the US Department of Justice or the Federal Maritime Commission.
“You can’t keep adding capacity just for the sake of growing. We’re already in a situation of oversupply this year, which will be exacerbated even more by the newbuilding deliveries next year. “Those secondary tier players are always going to have to collaborate in some form of alliance,” said Gore.
