OCEAN Alliance Gets a Formal Nod from FMC

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After an exhaustive review process by the US Federal Maritime Commission (FMC) it was concluded that the proposed OCEAN Alliance becomes effective on Monday, October 24, 2016.

Dive Brief:

  • The Federal Maritime Commission (FMC) approved the Ocean Alliance’s Vessel Sharing Agreement (VSA), effective Monday.
  • The Ocean Alliance would combine the shipping capacities of COSCO Shipping, CMA CGM, Evergreen Marine and Orient Overseas Container Line, although each line must separately negotiate all contracts with third-party service providers.
  • The approval is the first step towards the Alliance’s launch, which is scheduled for April 2017 but must still be approved by Chinese and European regulators. Only one VSA has ever been rejected by any regulator: China discarded the P3 Network between Maersk, MSC and CMA CGM in 2014.

Dive Insight:

Given the global nature of large shipping alliances, all three regulators must approve the VSA before it is implemented.  The U.S. approval is a positive sign for the alliance, which provides major Chinese and European shipping lines an opportunity to compete with the 2M Alliance.

Regulators’ main concerns are the potentially anti-competitive nature of a VSA: the agreements allow shipping lines to secure a greater market share through expanded service offerings and reduced operating costs, but too-large an alliance could drastically reduce prices and crowd out smaller players.

The P3 Network veto prevented a European-dominated alliance, but the subsequent approval of 2M resulted in a similar result a year later.  The rise of alliances and Panama Canal expansion pressured smaller lines to increase capacity to retain market share, but the new industry strategy appears to create competing alliances.

The Ocean Alliance would be the largest of them all, according to a Journal of Commerce infographic, and would control the largest market share in both the Asia-Europe and Trans-Pacific trade lanes.  In terms of global market share, THE Alliance — comprised of Hapag-Lloyd and five Asian carriers, and set to launch in April as well — would move the second highest volume, leaving 2M in third place by next year.

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Reference: JOC, Supply Chain Dive, CNSS

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