Some supply chains are in a state of flux due to a lack of definitive information about the future operations of the new alliance networks. The lack of information hinders planning and logistical arrangements at the respective ports. In response to the grumbles about limited information, the Ocean Alliance has released an update that focuses on their East-West network, including a full port rotation schedule. More importantly, the report seems to be covering some of the information gaps that were left behind by the previous communique. For shippers, this is a godsend after many days of anxious anticipation. The trans-Pacific trade route has been particularly vulnerable given the fact that service contracts were due for negotiation. Without the relevant information, it would mean that shippers were negotiating from a very weak position.
The other details that have been released include transit times as well as the terminals that are due to be called upon. Port arrival and departure dates seemed to be an area of contention because they affect virtually all the other aspects of the shipping industry. For some, the lack of information meant that they could not proceed with their scheduling and launches. The latest information release relates to the mega alliance of a number of well-known Cosco Shipping lines as well as Orient Overseas Container. Others are CGM, Evergreen Line and CMA. Some industry watchers see this as a matter of urgency since the alliance is due to start operating in the next five weeks.
Size and Scale will be Important
It is expected that the Ocean Alliance will commission ships with an average twenty-foot capacity of 14,000. These will operate on the Asia-North America West Coast service line. It is notable that this is the very first direct service that runs between Los Angeles and Jakarta. At the moment we do not have the exact details of the ship sizes for the Asia-North Europe service line. Nevertheless; a representative indicated that these are bound to be bigger ships. This is nothing new for the alliance since they have always deployed some of the largest container ships in the world. For example; between 2015 and 2016 CMA CGM deployed 18,000 TEUs that were roaming throughout the US West Coast. Apparently this was a pilot scheme to test the readiness for that scale and volume.
Ocean Alliance Will Be the Market Leader
The Ocean Alliance will remain the market leader associated with a significant market share on all its selected routes. One notable development is the inclusion of Cai Mep, the Vietnamese port. Existing statistics indicate that the Ocean Alliance will retain its position as the largest of the trio of vessel-sharing agreements that are dominating the shipping industry at the moment. There are three main vessel-sharing agreements that cover the US import line from Asia. The Ocean Alliance remains dominant with 40% market share. The other rivals in that market include the NYK Alliance of MOL, ‘K’ Line, NYK Line, Hapag-Lloyd and Yang Ming Line.
It is anticipated that the Ocean Alliance will vie with the NYK Alliance for market dominance against the already established 2M Alliance of Maersk Line and Mediterranean Shipping Co. Hyundai Merchant Marine. This established alliance has already signed a slot-sharing agreement with 2M in December 2016.
The new information will help to reassure the team at Port Klang in Malaysia, which was waiting to see whether it would be included in the port rotation, particularly with reference to the lucrative East-West services. Currently CMA CGM has captured about 33% of the throughput at Port Klang which equates to about a quarter of the revenue stream. The concern was that once the French line set up an operating center in Singapore as well as the terminal joint venture with PSA International, Malaysia would be losing out on business.
Increased importance of Vietnam Trade
One of the results of the current arrangements is the ascendancy of the Vietnamese trade. Some of the key events include the announcement that Maersk Line was busy trying out its port readiness. This was followed by indicators that the trade in Vietnam was rising with an increment of about 35% within the North European business line. That is one of the reasons why Vietnam is now the largest Southeast Asian exporter to the USA. The Vietnamese port of Cai Mep can now boast inclusion on the schedules for the Asia-Europe and trans-Pacific routes. Sitting just south of the Ho Chi Minh City, this is likely to become a hub of shipping within the region.
The current schedules indicate that the vessels are expected to call at the Tan Cang-Cai Mep International Terminal. This used to be one of the crown jewels of the now defunct Hanjin Shipping with its 21.3% stake. During the receivership proceedings, Hanjin sold its stake to Hanjin Transportation; the logistics wing of the organization. This was designed to liquidate some assets in order to pay off creditors. Currently, the stake is being run in partnership with Wan Hai Lines, MOL and Saigon Newport.
If anyone is in doubt about the importance of Vietnam to the shipping industry; one needs no further evidence than the recent example of how the Maersk Line docked its largest vessel (Margrethe Maersk of 18000 TEU) at the Cai Mep Container Terminal which is currently run by APM. This was an attempt to test whether the port was ready for the largest ships in the world. Indeed; records show that this was the largest vessel to ever call at Cai Mep. This is great news for the port which lies within the Vung Tau landing site. There is every chance that this could turn out to be the much-anticipated transshipment hub for the Southeast Asian market.
As has been demonstrated over the past few months, the success of the shipping industry to a large extent is dependent upon the success of the new amalgamated shipping alliances. That is not to dismiss the logistical requirements and potential challenges of running a mega shipping outfit. Nevertheless; this news offers clarity and even hope for an industry that is still traumatized by the demise of Hanjin.