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  February 20th, 2017 | Written by

Don’t Expect Smooth Sailing for New Alliances

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  • Not much more is known about the Ocean Alliance and THE Alliance since the original November announcements.
  • Two crucial bits of information are missing from alliance plans.
  • THE Alliance has only firmed up rotations on three of its 30 weekly services.

The shipper and carrier communities have been waiting with baited breath for the inauguration of the new container shipping mega-alliances on April 1. But if they think it’s going to be smooth sailing from Day One, they’ve got another thing coming, according to a new report from Drewry

There are only six weeks left before the container industry welcomes the next big chapter in its evolution as two groups of carriers join forces to create two new and bigger alliances to take on the might of Maersk Line and MSC in the 2M network. Yet, not much more about the two new networks – Ocean Alliance and THE Alliance – is known since the original announcements were made in early November, which is giving some industry stakeholders cause for concern.

The original details included proposed, or Day One, service names and rotations but little else, which was as to be expected considering the long lead time. At that early stage both groups included a number of pending decisions on ports in their rotations, but while the Ocean Alliance has answered all of those outstanding questions; the same cannot be said of THE Alliance.

Companies in both groups have created new shiny brochures that shed a bit more light on what the finished networks will look like. Ignoring the fact that some port names are still missing for the moment, the brochures do include updated port rotations, port-to-port transit times and a host of bullet points that sell the uniqueness of their product. However, two other crucial bits of information are missing; the days of the week for the port calls and the size of ships to be deployed by service.

CMA CGM’s original press release in November said that vessel deployment details for each service would be released around end of the same month. Finally, last week CMA CGM updated its online brochure to include more information with most services now showing the terminal alongside days of the week and the and berthing/departure times. There is less information available for the Asia-Med and Asia-Middle East services. The document answered the final pending port call decision by designating Tanjung Pelepas as its Southeast Asia hub on the Asia-Europe FAL7 loop.

Without this information it is very difficult for ports and terminals to properly plan their future workloads. It can be assumed that after discussions and negotiations with carriers they have better knowledge of what the finished alliances products will look like, but other important stakeholders in the supply chain, such as truckers, railroads and shippers are probably to be at the back of the queue when it comes to accessing this vital information. At a recent Georgia Foreign Trade Conference there was general agreement among panellists, including from Drewry, that the introduction of the new alliance structure will cause delays.

As mentioned previously, a number of ports have not been formally assigned to new services, at least publicly. Using the latest network brochure of CMA CGM (the biggest carrier in the Ocean Alliance) we know that the port rotations have been finalized for all 40 weekly services. In stark contrast, THE Alliance has only firmed up rotations on three of its 30 weekly services, according to the current brochures of Hapag-Lloyd, the main player in THE Alliance. In 19 cases there are at least two ports pending on a given loop and in the worst case on the Asia-Europe FE2 service there are a total of five ports pending. For shippers, the lack of clarity on which hub ports are going to be used is not too much of an issue, as its fairly invisible to them – but the gateway ports are a much more significant hole in their knowledge.

On that last point it has been leaked that DP World has been awarded five of THE Alliance’s Asia-North Europe UK calls, split between Southampton (three) and London Gateway (two), which if accurate would be the latter’s first Asia connections, three years after opening.

The new brochures also reveal that each group has slightly lowered their ambitions as the Ocean Alliance will start with 40 weekly services instead of the 41 originally proposed after one of five planned Asia-Mediterranean loops (MED4) was cut, at least according to CMA CGM. There is Fellow Ocean Alliance member OOCL was still listing the omitted service on its website along with the days of the week.

THE Alliance will begin operations with 30 services instead of the planned 31 with two of the slated 11 Asia-West Coast North America services being pulled. An agreement with Zim means that there will be an additional Med-North America service.

Some changes were expected, and are completely understandable, but without any knowledge on the service deployment it is impossible to know whether these alterations will mean any change to either group’s planned capacity by trade.
It is difficult to know what to make of the tardy delivery of information to the market. It could simply be a case of brinkmanship between the carriers and ports/terminals to get the best THC rates, but there is a serious risk to leaving it too long as they might not get their preferred berthing windows, or indeed their preferred port or terminal. This would have operational ramifications on each company’s wider networks that link to the mother vessels, required yet more tinkering, time and cost, and could well have a commercial cost if shippers don’t like the day of the week the vessel is calling.

It also hints at muddled and complex decision making, a case of too many cooks being unable to settle on a decision. Or it could be that with so many competing voices wanting to secure berths at terminals affiliated to their own companies that getting a quick decision has proved problematic. Either way, that does not bode well for future strategy planning.

One wonders if carriers from both groups decided against announcing any capacity details for fear of undermining their contract negotiations with shippers. Any signal of a future rise in capacity from April could well have dented their bargaining power in the latest round of annual East-West contracts, which by all accounts carriers fared much better in than last year.

All the while, the 2M alliance carriers can use the delays of its rivals and its own relatively settled network to its advantage.