Ocean Shipping Alliances Impact U.S. Exporters
Lately, nearly every headline in the global shipping industry announces a new alliance between the world’s top carriers, or the addition of new member companies.
The three most significant developments have been the recent formation of two new alliances—THE Alliance (Hapag-Lloyd, Yang Ming, Hanjin, K Line, NYK and MOL) and the OCEAN Alliance (CMA CGM, COSCO-China Shipping, OOCL and Evergreen)—and the possible expansion of the 2M Alliance, with Hyundai Merchant Marine and Zim Integrated Shipping Services in discussions to join Maersk and MSC.
Other shipping companies have been approached to join one or more of these groups, while others have merged with existing members: France’s CMA CGM is in the process of completing the acquisition of Singapore’s Neptune Orient Lines Ltd., and Hapag-Lloyd Dubai’s United Arab Shipping Company agreeing to merger terms.
For carriers, such partnerships make great business sense. Alliance members can share ships, networks and ports of call, and in doing so save millions of dollars annually at a time when the industry is struggling.
But alliances mean fewer shipping options for U.S. exporters. That may not inevitably lead to reduced levels of service, but if the airline industry is any indication, it doesn’t bode well.
Speak to any frequent flier about the experience of air travel before Delta merged with Northwest, United purchased Pan Am routes and merged with Continental, and American Airlines acquired TWA and merged with US Airways. Fares are higher, additional fees are charged on everything from baggage to changing reservations to pillows, blankets, and seat selection, and customer service survey results are worse than the approval ratings for Congress.
Yes, it’s a different industry with a different business model, but that hasn’t stopped the Federal Maritime Commission (FMC) from monitoring the restructuring of ocean carrier alliances.
“At the end of the day, alliances are supposed to benefit the shipper by providing increased choices, increased competition, and increased efficiencies,” said FMC Chairman Mario Cordero at the 2016 International Trade Symposium. “With the number of ocean carriers decreasing through merger and acquisition activity, and alliances restructuring themselves into larger entities, it is not unreasonable to ask, ‘Is the shipper really going to benefit?’”
Cordero relayed commitments from carriers promising increased efficiency and reduced congestion, but reiterated “It is going to take careful, diligent and aggressive oversight to make certain the changes that are taking place among container carriers do not harm the American shipper.”
As these alliances move forward, subject to regulatory approval, Cordero reassured U.S. exporters that the FMC benchmarks for carrier performance would remain a standard by which companies are reviewed. Reliability, shipper satisfaction and the efficient flow of containers from terminal gate to final destination will all be monitored.
“The very last messages I want to hear are from shippers telling me that their choices have been reduced and service diminished as a result of these new alliance structures, or that port congestion is increasing because cargo is now transiting fewer gateways,” Cordero said. “The Federal Maritime Commission will work diligently to protect and enhance the international, intermodal supply chain.”
Need a Logistics Provider?
Compare over 100 Instantly
The “Deadly Dozen” and Human Behavior