Steamship Line Consolidation and Alliances: A Balancing Act
Steamship line alliances involve cooperative agreements between two or more independent carriers. These alliances typically focus on sharing vessel capacity, port calls, and operational resources to enhance network coverage and service frequency. By collaborating with each other, alliance members can offer shippers more comprehensive routes, improved transit times, and a wider range of destination options.
There are three major alliances in operation which are comprised of the below steamship lines:
2M: MSC and Maersk
Ocean Alliance: CMA-CGM, COSCO, OOCL and Evergreen
THE Alliance: Hapag Lloyd, NYK, Yang Ming, MOL, K-Line and HMM
Interestingly, the space dedicated to these alliances only accounts for 39% of the global capacity collectively, while the top nine carriers control 83%. The top two carriers are MSC and Maersk which have aligned as 2M. This alliance is set to end in 2025 as MSC grows its capacity large enough to operate on its own, while Maersk plans to continue being active in vessel sharing agreements to maintain its expanded footprint.
Steamship line consolidation involves the merger or acquisition of multiple shipping companies into a single entity. By combining resources and expertise, consolidated carriers can optimize fleet utilization, lower overhead expenses, and negotiate better deals with port authorities and service providers. A recent consolidation has been between the Maersk brands, with Sealand and Hamburg Sud being integrated into Maersk.
So how do these situations impact the market?
Consolidation and alliances have had a profound impact on the shipping market, bringing both positive and negative consequences. On one hand, these developments have contributed to lower freight rates, improved service reliability, and increased network connectivity. Shippers benefit from reduced transportation costs and enhanced supply chain visibility.
On the other hand, consolidation and alliances have raised concerns about reduced competition, potential market dominance, and limited pricing options. The formation of large conglomerates raises fears of decreased responsiveness to shipper needs and diminished innovation. Additionally, the concentration of power among a few alliances could lead to anti-competitive practices and higher shipping costs in the long run.
As the shipping industry continues to evolve, the role of steamship line consolidation and alliances will remain a subject of debate. While these partnerships offer potential benefits in terms of efficiency and network expansion, it is important to safeguard against anti-competitive practices and ensure that shippers retain a degree of choice and bargaining power. Led by Stephen Kauble, our Carrier Relations Team at FGN proactively builds relationships with a diverse range of carriers. With over a decade of experience negotiating contracts for bulk liquid logistics including flexitank transport, shipper owned containers, and other specialized equipment, Stephen is acutely aware of the nuances required in bulk liquid transport. Additionally, the carrier collaborations that we have built over the years allow us to match shipments with the best options while considering cost, transit times, reliability, and equipment availability among other factors, and is an important reason why FGN remains knowledgeable on industry happenings.