Although the pricing and demand situation in the container shipping market remains grim, the speed of consolidation appears to be being maintained.
Alphaliner, the container shipping analysts, reported that it believes the French based CMA CGM is manoeuvring to align COSCO (China Ocean Shipping Group) and a string of other carriers into a new conference structure, one large enough to dominate the sector and undo the existing conferences. The ‘G6’ conference is already weakened by the imminent loss of NOL/APL which has been bought by CMA CGM. Alphaliner suggest that the new alliance will be composed of CMA GGM, COSCO, Evergreen and OOCL; resulting in the ‘CCEO’ alliance. This network would then be in a position to rival the combination of Maersk and Mediterranean Shipping Lines, particularly on the largest trades.
Alphaliner’s calculations suggest that the CCEO would have a capacity of between 2.5-3m TEU, as compared to the G6 which has around 1.7m TEU.
This would imply a considerable restructuring of the container shipping sector. The heightened capital utilisation theoretically offered by such an alliance would inflect greater pain on smaller lines who are already suffering from the ferocity of the market. Consequently, the likelihood of them going out of business would increase.
Such an alliance is not certain and in any case, alliances can be difficult to run not least because different shipping lines have different service levels and pricing structures. However, that such a suggestion can be made illustrates that the container shipping sector is continuing to consolidate.
This may be not good for shippers. The power of the largest lines appears to be increasing and the smaller lines may be disappearing. If such a trend continues customers will be faced with fewer options in purchasing shipping services whilst the pricing power of the big container lines will inevitably drive-up prices.
Source: Transport Intelligence, 24th February 2016
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)