Smaller Carriers Must Form Alliances

Ron Widdows, Chairman of the World Shipping Council has stated that smaller carriers will be forced to opt into alliances as scale has become a much more significant factor within the global shipping industry, according to Seatrade Maritime.

Ron Widdows said: “When you're competing against a carrier that is four to six times your size, the economies of scale from a cost standpoint are not even remotely close.

“The scale game is effectively over for many of these companies, you just can't invest enough billions in assets organically to get enough scale to be competitive from a cost standpoint.

“That's driven the coalescence around alliances; for the smaller carriers you have no choice but to operate within an alliance structure, unless you can find a really unique niche. Fundamental structural change has taken place within the industry and it will be what drives the outcome for some time to come.”

Mr Widdows concluded that the lack of cooperation among industry players in coordinating these two variables is part of the reason for the problem.

It was previously reported that Cosco and CSCL’s planned alliance is now in the process of being merged, with its terminal operations also being involved to a lesser degree.

The rate at which shipping mergers are increasing has been noted, which is causing increased competition in the industry and leaving smaller lines struggling to stay competitive.