Three global shipping lines form alliance serving Asia, Europe and US

The Ocean Three pact of the world's three largest container shipping lines is expected to reshape the battleground for market shares

PUBLISHED : Wednesday, 10 September, 2014, 4:05am
UPDATED : Wednesday, 10 September, 2014, 4:05am

Three of the world's largest container shipping lines are forming an alliance that will cover major trade lanes between Asia, Europe and the United States in another move shaping the global container trade into a battleground of four large consortiums.

France's CMA CGM, Shanghai-based China Shipping Container Lines and Dubai-based United Arab Shipping Co said yesterday they had agreed to co-operate on east-west trades in 15 services.

The Ocean Three pact will operate for an initial 24 months, pending approval from the US Federal Maritime Commission.

It will garner 20.3 per cent market share in Asia-Europe trade and 13.1 per cent on Asia-North America trade, according to Tan Hua Joo, an executive consultant at Paris-based container shipping consultancy Alphaliner.

Other than services covering Asia-Europe, Asia-Mediterranean, transpacific and Asia-US east coast trades, Ocean Three also plans to open sailings on Asia-Adriatic Sea and Asia-Black Sea routes, with more routes under discussion.

"Potential further agreements related to the transatlantic trade are still under discussion and will be announced in due course," UASC said in a statement.

The move had been widely speculated in the industry as the three companies - ranked third (CMA CGM), seventh (CSCL) and 19th (UASC) in the world by fleet size - were some of the few shipping lines in the top 20 not involved in alliances.

Other pacts include the six-member G6, five-member CKYHE and 2M, which brings together Maersk Line and Mediterranean Shipping Co, the world's two largest container lines, in a partnership also pending FMC approval.

"While the joining of CMA CGM, CSCL and UASC does not come as a surprise, the three carriers shouldn't be viewed as merely 'leftover' because they do fit together very nicely," said Alan Murphy, the chief operating officer and partner at SeaIntel Maritime Analysis, a shipping consultancy in Copenhagen.

"While on par with G6 and CKYHE in terms of fleet size, Ocean Three will clearly outrank the two other alliances on such important parameters as average vessel size and fuel efficiency, only second to 2M."

CMA CGM would have been part of a pact with Maersk Line and MSC had the Chinese authorities not rejected the P3 Network, which would have included back-office co-operation not seen in other shipping alliances.

Under pressure from a vessel supply glut and reduced cargo demand since the euro-zone crisis, the world's major container shipping lines have clung more closely to one another, pooling more vessels to serve a wider range of destinations, with some featuring exclusive alliances, in a bid to lower operating costs without breaking antitrust laws.

"From a carrier perspective, alliances are a necessary evil, a 'forced marriage of convenience'," Murphy said. "No carriers would enter into an alliance if they were not forced to it by market conditions, that is if they could operate as cost-efficiently on their own.

"In theory, this should lower the costs for shippers while increasing the 'commoditisation' of the industry, although it does reduce product diversity."