Shipping Lines Prepare New Global Alliance

Container shipping lines left out of a recent wave of industry consolidation are close to forming a new global alliance, a leading U.S. shipping regulator said.

Representatives of the companies will meet Wednesday with the Federal Maritime Commission to discuss their proposal, with an announcement of their plans possible that day, said William Doyle, an FMC member.

Mr. Doyle declined to name the carriers meeting with members of the regulatory body or say how many operators were involved in the discussions. Several of the world’s major shipping lines, including Germany’s Hapag-Lloyd AG and South Korea’s Hanjin Shipping Co. Ltd., risk being left on the sidelines as a deep downturn in the shipping business crashed against the industry and helps break apart long-standing agreements among carriers.

Last month, CMA CGM SA and China’s Cosco Group, the third-largest and fourth-largest shipping lines by capacity, said they would form the Ocean Alliance, pulling in Hong Kong’s Orient Overseas Container Line and Taipei-based Evergreen Marine. The move unraveled other pacts, triggering a new round of deal-making to share vessel space.

Maersk Line, the A.P. Moller-Maersk shipping unit that is the world’s biggest container line by capacity, is teamed up with No. 2 carrier Mediterranean Shipping Co., in the 2M alliance. Those two carriers together hold about 28% of the world’s container ship capacity, according to industry data firm Alphaliner, although only specific ships and trade circuits are included in the alliance agreements.

Such alliances have taken on increased importance in a global-shipping industry buffeted by overcapacity and slowing volumes. By entering into alliances-in which firms share everything from ships to port operations-companies can cut operational costs.

Among other carriers still left out of the industry’s alliance dance are Hamburg Sud, United Arab Shipping Co. South Korea’s Hyundai Merchant Marine Co. Ltd., Taiwan-based Yang Ming Marine Transport Co., and Japanese carriers Mitsui O.S.K. Lines Ltd and Nippon Yusen Kabushiki.

The Wall Street Journal reported last month that Hapag-Lloyd and Dubai-based UASC were in talks about combining their fleets or moving into a full-blown merger.

Nils Andersen, chief executive of A.P. Moller-Maersk, said in a conference call on the company’s first quarter earnings last week that “small and midsize companies will need to consider their strategy very radically. if they’re not in an alliance that has a future.”

“Either they will have to consolidate in an alliance and give the best possible offer to the customers or they will have to concentrate on very few long-haul routes or on a local regional activity,” Mr. Andersen said.

The Ocean Alliance intends to put its agreement into motion in April 2017, and Mr. Doyle said he expects the carriers to make a formal application for review within the next two months. That would begin a 45-day clock for comments and an FMC decision, although that timetable could go longer if commissioners ask alliance members to respond to questions raised during the comment period.

Source: Hellenic Shipping News