Four Shipping Alliances to Control 95% of Market Share
In the wake of the formation of the 2M alliance by Maersk Line and MSC, their former P3 partner CMA CGM is expected to team up with China Shipping and UASC. Based on their present involvement in services as a vessel operator, CMA CGM, China Shipping and UASC (referred to as CCU) should be able to offer a combined number of 18 weekly plus one fortnightly service on the east-West routes, deploying 154 ships of average 8,100 TEU, total 1,250,000 TEU nominal capacity. If CCU materialises, the Europe-Fax East trade will consist of four separate marketing consortia only, most of which are also active on the Transpacific and Transatlantic routes, comprising 16 carriers with their own independent pricing policies. The latter is a guarantee for shipper that prices will remain as low as they are today.
- 2M -Maersk Line, MSC
- CCU -CMA CGM, China Shipping UASC
- CKYHE -Coscon, “K” Line, Yang Ming, Hanjin, Evergreen
- G6 -APL, Hapag-Lloyd, Hyundai, MOL, NYK, OOCL
The four consortia’s coverage of the North Europe-Far East trade is 100%. A small number of mainly standalone carriers are active on all other routes, including Mediterranean-Far East. Assuming that, alike 2M and G6, CCU and CKYHE will also become active on all three East-West routes, they would have the following broad/indicative trade capacity shares on each of the these routes.
| Consortia | East-West | Eur-FE | Transpac | Transat |
| 2M | 27% | 34% | 15% | 40% |
| CCU | 15% | 20% | 13% | 6% |
| CKYHE | 25% | 23% | 32% | 4% |
| G6 | 28% | 20% | 33% | 38% |
| All | 95% | 97% | 93% | 88% |
If there is one thing capable of changing the above picture, it is the number of 10,000+ TEU ships still in the pipeline, which include quite a large number of leviathans of between 15,000 and 19,000 TEU. Combined, the 16 carriers operating inside the four consortia (2M, CCU, CKYHE, G6) currently deploy 230 ULCS of 13,100 TEU average, while they have 122 such units of an average 14,500 TEU on order for delivery until mid 2017. This results in a grand consortia total of 352 leviathans, 13,500 TEU average, 4,781,000 TEU total.
Qatar Takes Control of UASC
Gas rich Qatar is finally confirmed to have taken the controlling interest in fast growing United Arab Shipping Co. In a US Federal Maritime Commission filing, it was revealed that the world’s largest exporter of liquefied natural gas, Qatar, has taken a 51.3% stake in the carrier. According to Lloyd’s List Intelligence, prior to the deal, the governments of Kuwait, Qatar, Saudi Arabia, the United Arab Emirates and Iraq each had a 19.3% stake in the shipping line and Bahrain had a 3.5% shareholding. In a statement, UASC said Qatar became the majority shareholder during 2014. Although it did not reveal exact details of the change or the impact it had on shareholding, it said the change in ownership was the result of Qatar’s contribution to a series of capital increases to support the carrier’s expansion plans. It said the expansion plans were approved by shareholders before the latest change in ownership. There has been mounting speculation that UASC had gained a new majority shareholder over recent months. The carrier’s fleet renewal program concluded in March with the addition of a sixth 18,000 TEU ship and was announced in August last year. In late August last year, it was revealed that the vessels would be LNG-ready, meaning they can easily be switched to LNG fuel when necessary.
Rising Labour Costs to Impact Shipping
Rising labour costs continue to drive factories out of the Pearl River Delta, with more than a third of Hong Kong based manufacturers planning to move production to areas with lower costs over the next three years. A survey by the Chinese Manufacturers’ Association of Hong Kong or CMA, found that 32% of all members polled were preparing to exit the South China production centre, the highest percentage recorded in years by the regular survey. “Since 2008, the CMA has conducted surveys on the business environment in the Pearl River Delta to gain insights into the current business situation of our members, their business outlook and their mid-long-term strategies,” CMA Chairman Irons Sze told reporters in Hong Kong. The survey interviewed 274 companies between March and May and also found that 30% of manufacturers planned to out back investment in their Pearl River Delta operations, with 93% of respondents pointing the finger of blame at the increasing costs of labour. Labour costs have been increasing by 10% to 15% a year as factory owners try to keep pace with the constantly rising minimum wage. Beijing has in the past few years been forcing up wages and making manufacturers climb up the value chain, while encouraging coastal factories making high-polluting, low-cost goods to move inland to central cities such as Chongqing, Wuhan and Chengdu.
Cyber Attack Hits Logistics Operators
A sophisticated computer attack launched from China stole financial records, customer data and shipment manifests from as many as seven shipping and logistics companies, using handheld scanners infected with malicious software to crack through corporate security systems. The first cyber attack known to specifically target global shipping companies raises concerns about the security of supply chain information management systems, especially when a plethora of new peripheral devices are being plugged into enterprise-wide computing systems. “We’re moving into a new era of threat factors,” said Carl Wright, General Manager of security firm TrapX, which discovered the malware when testing a customer’s security system. “Over the last two years, there has been a tremendous amount of profit from cyber attacks.” This is the first enterprise scale attack on supply chains Wright and TrapX have seen, he said. “We’ve recognized the risk, but heard more things on the consumer level, like malware-infected phones,” he said. “This is the first time I’ve seen something like this.”
Idle Container Fleet Declines
The latest figures from Lloyd’s List Intelligence show that the capacity of the inactive box fleet decreased to 216,396 TEU this week, compared with 238,679 TEU a week ago. In terms of the percentage of the total box capacity that is not in use, this week’s figure represents 1.2% of the total fleet compared with 1.4% a week ago. In percentage terms, the highest level the inactive fleet has reached this year came in mid-March when it reached 3.5% of the total fleet. The inactive fleet has now been below the 2% level since mid-May, when carriers began to prepare for the coming 3rd quarter peak season. The inactive fleet is also tracking below the year-ago level when 2% of the fleet was inactive. The lower level is a reflection of increased scrapping activity in the 1st half of 2014 and also increased demand.
Slow Growth of Indian Ports
During the first fiscal 2014 April-June containers handled by the eleven Indian major container ports increased by 4% to 1.94 million TEU, still marginally below 1st quarter 2012 throughput. Whereas, Nhava Sheva seems to have recovered from last year’s decline, box handling at Kandla has come to a complete standstill after the termination of the stevedoring contract with ABG and PSA. Visakhapatnam, losing 3%, did not perform well either. On the positive side, New Mangalore (+42%) and Tuticorin (10%) continued their steady growth.
Hamburg Sud to Takeover CCNI’s Liner Activities
It was revealed that the offer for CCNI’s liner operation is valued at USD 160m, with the Chilean company expecting to book a financial gain of USD 85m if the transaction goes through. CCNI’s box liner services, including branding and logo, a container yard, cargo contracts, terminals, vessel-sharing agreements, agency business, time-charter contracts, a charter deal for four 9,000 TEU ships currently being built at HHIC-Phil shipyard for 12 years and to take on CCNI staff. The new buildings are marked for delivery in 2014 and 2015. The filing said that the CCNI Board had voted to accept the offer based on the current state of the container shipping market.
The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business School (EEP).