With around 80% of global trade transported by sea and three major shipping alliances controlling 95% of the critical trade lanes from Asia to North America and Europe, a handful of shipping lines have massive influence over the cost and effectiveness of international trade.
The three major shipping alliances – 2M, THE Alliance, and Ocean Alliance – were formed in 2017 to support economies of scale, low prices and broad service coverage. These three alliances account for 80% of the global container market, with greater market share on many trade routes.
The high fixed-cost structure of shipping lines is one of the main arguments for shipping lines to collaborate. The rationale being that each liner service requires investment in a number of vessels to complete round trip voyages between different ports, which will sail on fixed dates regardless of how much cargo they are carrying, often leading to very poor utilisation, which is cost ineffective and environmentally unfriendly.
However, allowing collaboration between carriers, means that the alliance partners can agree to operate a liner service along a specified route using a specified number of vessels. It is not necessary for each alliance member to allocate equal numbers of vessels, because the space that is available for loading and discharging at each port of call is shared between the partners.
The amount of space that each partner gets may vary from port to port and could depend on the number of vessels which are operated or placed by the different partners within the agreement and means that the partners have flexibility to meet demand and increase utilisation rates, which reduces operating costs and boosts efficiency.
Collaboration in this way has allowed the alliances to leverage each partner’s geographic strengths to develop more comprehensive global shipping networks, which have extending coverage and provide more routes, which improves the service offerings for their customers.
Entering alliances seems to be a good fit for smaller lines, that benefit from the extended service coverage and larger shipping lines who can bleed their assets. This is demonstrated in the different strategies of MSC and Hapag-Lloyd, with the former focused on organic growth and the rapid growth of its fleet, while Hapag-Lloyd has been collaborating in partnerships since 1989 and has only recently committed to the acquisition of the mega-ships, that have become synonymous with the rise of the alliance on the trade lanes from Asia.
The three major shipping alliances collectively account for 80% of the shipping market and include all of the biggest container lines:
2M Alliance: Maersk and MSC
Ocean Alliance: COSCO, OOCL, CMA CGM, and Evergreen
THE Alliance: Hapag-Lloyd, ONE, Yang Ming , HMM
Metro leverage opportunities across the shipping alliances, with long established relationships across a portfolio of carrier partners, to give our customers access to new solutions and the widest range of service offerings, port-pairings and rates.
By working closely with our global network and inland logistics partners we deliver a range of upstream and downstream value added services, initiatives and solution innovations, which the carriers cannot match.
Our bespoke solutions are always driven by our customers’ requirements and expectations. For further information contact Elliot Carlile, who would be delighted to talk to you about your requirements.