The New Year is quickly approaching and we’re having conversations among our freight forwarding team members as well as our customers about what we can expect in 2017. One major concern for international shippers in the New Year is the impact of the new steamship line carrier alliances coming together. It’s been estimated that these alliances move about 90 percent of the freight.
What are the alliances? Major steam ship lines decided a few years ago that there’s strength in numbers. They banded together under the following carrier alliances:
- The 2M Alliance of Maersk Line and Mediterranean Shipping Company (MSC). The two largest carriers and longest running alliance.
- The Ocean Alliance of CMA-CGM, China-COSCO, Evergreen Line, and Orient Overseas Container Line (OOCL).
- The newly formed THE Alliance made up of Hapag-Lloyd, K Line, MOL, NYK Line, and Yang Ming Line.
For United States import/export trades in Asia the alliances are closely balanced in capacity servicing the West Coast and East Coast ports. Here are our predictions:
- Overcapacity will still exist in 2017, so carriers will probably chase market share driving down spot market rates for the first two quarters of the year.
- Alliances should provide consistent service to US ports and allow smaller carriers to compete against the top two or three carriers in the trade lanes.
- As a side note, large importers and exporters signing direct carrier contracts now must consider the financial condition of the carrier along with price and service. Some financially strong carriers like Maersk may benefit.
In 2017, we will be watching the consolidation of the industry continue. After the Hanjin bankruptcy; smaller carriers scrambled to match up with others to build capacity and economies of scale in order to compete. For example; China Shipping and COSCO, Hapag merged with United Arab Shipping; CMA purchased APL; and recently a Japanese carrier combination was announced with MOL, K Line, and NYK Line. Maersk is pursuing now independent carrier Hamburg Sud.
This consolidation trend will likely continue and could actually benefit the industry, which quite frankly needed consolidation to create balance and competition between the remaining players. Now we watch and wait to see if consolidation and alliances stabilize the steamship line industry a year from now when we consider 2018.