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CMA CGM Ink Deal to Create Mega Shipping Alliance

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CMA CGM, COSCO Container Lines, Evergreen Line and Orient Overseas Container Line have signed a Memorandum of Understanding to form a new 'OCEAN Alliance', which will enable each of them to offer competitive products and comprehensive service networks covering the Asia-Europe, Asia-Mediterranean, Asia-Red Sea, Asia-Middle East, Trans-Pacific, Asia-North America East Coast, and Trans-Atlantic trades.

This follows news that the lines were looking to form an alliance in a bid to increase their dominance over the East-West trades and challenge the market dominance of Maersk Line and MSC’s alliance, 2M.

In a statement, the member carriers said: “This new partnership will allow each of its members to bring significantly improved services to its respective customers.

“Shippers will have an attractive selection of frequent departures and direct calls to meet their supply chain needs, including access to a vast network with the largest number of sailings and port rotations connecting markets in Asia, Europe and the US.

“The alliance will also bring service reliability and the most efficient integration of the latest vessels in a fleet of over 350 containerships.

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Initially, the deployment will cover more than 40 services globally mostly connected with Asia, including around 20 services each in the US and Europe related trades.”

Subject to regulatory approvals of competent authorities, the new alliance plans to begin operations in April, 2017, for an initial period of five years.

Lawrence Lee, President of Evergreen Marine Corporation, said: “Joint service cooperation is an essential part of our own strategic planning.  This new alliance enables us to optimize fleet deployment and offer competitive service to meet customers’ changing demands.”

Further details about OCEAN Alliance and the transition plans from the four member lines in their current alliances will be communicated to stakeholders and the market in due course.

The alliance is anticipated to add another three million TEU of operating capacity on top of CMA CGM and China Cosco Shipping’s existing operations.

China Cosco Shipping recently announced that it will be sticking out its current alliances until they expire, which was said to lessen fears of an immediate alliance restructure.

However, the new announcement of a mega East-West shipping alliance will shake up existing alliances and give the alliance a distinct advantage on major trade lanes.

Olaf Merk, Administrator of Ports and Shipping at the ITF of the OECD, said: “It is clearly the first step in the alliances shakeup that was in the making since the announced mergers of COSCO/China Shipping and CMA/APL.

“A lot will follow now. Is what remains of the G6 still viable? Will the restructuring of the Korean carriers (Hanjin and HMM) lead to a merger; how about the Japanese carriers NYK and K-Line? If it would, this would certainly lead to a new constellation, probably of three big alliances instead of four. So the system will remain in flux for a while.

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“It is also important to realise that there is a transition as most of the existing vessel sharing agreements are expected to last until at least the summer.

“The alliances shakeup will also have effects on terminals. Some terminals are joint-ventures between alliance partners, so if alliances change, these joint-ventures might come under pressure. So the merger of COSCO/China Shipping might mean they might want to strengthen their terminal portfolio, also by buying up shares from former alliance partners.”

China Shipping is currently in an alliance with UASC and Cosco with K-Line, Hanjin and Yang Ming. Once these expire, lines will most likely need to either form their own alliances or find alternative methods for boosting their service offering.

China Cosco Shipping has recently announced plans to downsize its workforce in line with Xi Jinping, President of China’s plan for creating a maritime economic corridor.

Hapag Lloyd recently made it clear that it does not intend to join forces with 2M; however, it will be looking into new opportunities to create its own partnership.

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