The global shipping market is a complex, dynamic industry that plays a crucial role in international trade and the movement of goods across the world. There are more than 7,000 active ships in the world and over 30 million containers. The market of shipping carriers, however, is very consolidated, with the 30 largest carriers owning more than 5,000 of those ships and accounting for more than 95% of all TEUs (according to Alphaliner).
Nearly one-third of the global market lies within shipping alliances focused on the main east-west trades. Those alliances are undergoing significant shakeups that will cause hundreds of vessels to change their rotations and shipping schedules. The new partnerships emerging will also shift port preferences and regional flows in the global supply chain but will ultimately benefit the market.
What is a Shipping Alliance?
Shipping alliances are strategic partnerships between major shipping companies that allow them to share vessels, terminals, and resources, coordinate shipping schedules, and improve their service offerings. Working together, they create more efficient and reliable networks with broader global ocean coverage, benefiting each company involved in the alliance as well as their customers.
These alliances also hold massive market power over specific routes, services, and rates as they make up nearly one-third of all available TEUs in the market. More notable is that the parent companies within these alliances account for more than 82% of the market. Changes within these alliances, as we are seeing now with the most significant changes in a decade, shape the entire landscape of international trade and change the competitive dynamics of the market.
Shipping Alliances in the Global Market
The top 10 largest carriers currently hold an effective monopoly over more than 80% of all TEUs at sea. Before February and the start of a restructuring of the global container shipping market, there were three main alliances known as the 2M Alliance, THE Alliance, and Ocean Alliance.
The two largest carriers in the world, Mediterranean Shipping Co. (MSC) and Maersk, made up the 2M Alliance. THE alliance joined Hapag-Lloyd, Ocean Network Express (ONE), Yang Ming, and HMM. The Ocean Alliance, which holds the largest market share and widest market coverage, is made up of CMA CGM, Cosco, OOCL, and Evergreen.
Ocean carriers are a highly consolidated market, with these 10 companies holding extreme bargaining power though alliance agreements are subject to strict standards and ongoing monitoring by the Federal Maritime Commission. February has brought the launch of reorganized alliances and vessel-sharing agreements that will shape major trade routes, create new service models, and significantly affect all key aspects of the market, from cargo capacity to schedule reliability.
Changes in Shipping Alliances
Among the top 10 shipping lines, old agreements have dissolved, and new alliances are taking shape. Let’s look at the changes:
- MSC of Geneva, the world’s largest container line, has parted ways with Maersk dissolving their 10-year vessel-sharing agreement formed in 2015 as the 2M Alliance. Moving forward, MSC will operate alone on the lines that it operated within the alliance and will now compete against Maersk. The shipping line offers a massive network of services across Asia-Europe, Asia-Mediterranean, and Asia-North America lanes with direct port-to-port services. They also remain the dominant carrier in the Mediterranean, with six weekly services.
- THE alliance dissolved with the departure of Hapag-Lloyd, the 5th largest shipping line, based in Germany. The remaining three members, ONE, Yang Ming, and HMM, remain in a strategic partnership as the Premier Alliance, which took effect on February 9th. The agreement will allow the three companies to share vessels in trade lanes between the United States and Asia, Europe, and the Middle East.
- A new alliance, the Gemini Cooperation, joins Hapag-Lloyd and Maersk in a new strategic partnership. Their approach will focus primarily on single-operator loops and fewer port calls while being dedicated to improving on-time service reliability. They have been public about achieving a goal of 90% on-time service in an industry that has hovered around only 50%. Their global reach will cover the entire scope of U.S. trades, including Asia to the West and East coasts, as well as trans-Atlantic services. While they will be offering fewer loops, their appeal is in prioritizing predictable transit times and schedule reliability.
- The Ocean Alliance made up of CMA CGM, Evergreen, Cosco, and OOCL, remains intact with an agreement that now extends to 2032. This alliance, according to Linerlytica (an Asia-based container shipping consultancy), has the largest market share and broadest coverage. Linerlytica data shows that the Ocean Alliance will offer 15 sailings to the west coast and eight sailings to the east coast. It will also have the widest coverage to North Europe, with seven sailings.
The shipping alliance changes are likely to have far-reaching effects on the global supply chain, starting with alterations in trade routes and capacity allocation that will shift the flow of goods. The changing dynamics may also impact companies’ sourcing strategies and distribution channels. On a positive note, however, the new alliance structure may lead to improved operational efficiencies, faster transit times, better capacity management across routes, and more stable shipping rates.
If you have any questions about the changes in the shipping alliances and how they may affect your business in the market, we can help. TOC Logistics International is a global freight forwarder and sister company to ProTrans International, offering a full range of international and domestic logistics services. Don’t hesitate to get in touch with our team of experts.