Container Liners Mull on Forming an Alliance to Seek Better Profits

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Sometimes back to see the benefits ticking Airlines had sought to be a part of an alliance for multiple purposes which also included saving money and offering passengers a variety of routes.  Similarly, at present container-shipping companies have also realized the advantages of pooling their resources.

While turning back the pages of history, till date there has been only four major container liner alliances.  At present, the trend is all set to change due to the unsteady freight rates due to the ordering of too many ships in the industry.  This act of rethinking by the container liners to form an alliance focusses on making a substantial profit.

Let’s see the recently formed new alliances!!

Last Friday, Germany’s Hapag-Lloyd disclosed that it is to form an alliance with five Asian carriers.  Besides, an alliance called as 2M partnership is already being formed by AP Moeller-Maersk and Mediterranean Shipping, the world’s largest container shipping companies by capacity.  And Ocean Alliance has been formed by next two large liners, CMA CGM and Cosco.

What are the top benefits of forming an alliance?

The top benefits in these vessel-sharing partnerships are the reduction of prices and efficient space sharing capacity.  As a result, it allows the shipping companies to undertake more frequent services without any addition of new routes or purchase of more ships.

Did the traditional activities change?

Yes, as the scenario changed the traditional practices in the shipping industry too took the directions of change regarding joining or merging with other shipping lines for a beneficial future for both the liners.  Cosco and CSCL have joined forces; Hamburg-Sued bought CCNI’s container line activities last year; CMA-CGM is buying Singapore’s Neptune Orient Lines and Hapag-Lloyd is talking to United Arab Shipping about a merger.

Exporters may have little options and benefits too!!

Less competition in shipping isn’t good news for exporters who currently benefit from low freight rates.  Smaller countries may come to rue the wave of consolidation because they may be left with less choice about who transports their goods.  Besides, more consolidation bodes well for an eventual recovery in industry profitability because smaller players may struggle to compete and bankruptcies would take capacity out of the market.

Source: Bloomberg

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