Shipping alliances form power blocs in logistic chain

For how long can shipping companies continue to build bigger ships? What are the consequences of the alliances in the maritime sector? And is shipping getting greener? Three questions around recent developments in this part of the transport sector are answered by Olaf Merk of OESO during the NT Port Event.

Due to the mergers and takeovers among shipping companies there is less competition and choice. The flip side is that large power blocks have emerged with the alliance structure that take a place at the negotiating table. Between 2014 and 2017 the third fusion wave can be seen in the sector. "We see a huge concentration," says Olaf. In 2000 the four largest shipping companies had 23 percent of the market, last year they had almost half of it. "It used to be the smaller shipping companies that formed alliances. Now we have three alliances of which all large shipping companies are members." The three alliances that run the container business are 2M, Ocean Alliance and THE Alliance.

This makes the market share of the alliances considerable. On the main trade route, from east to west, 2M has a market share of 24%, Ocean Alliance hold 34% of the market and THE Alliance 32%. Due to the investments in increasingly large ships the average capacity has quadrupled in the last twenty years. A larger ship pushes down shipping costs for the company, but raises the cost for the other links in the transport chain. Olaf expects the trend of larger ships to turn when it no longer has a cost advantage.

Olaf wonders whether this is a sustainable model. Research shows that the peaks in ports are increasing due to the larger ships and that the number of ports visited has reduced. This trend can also be seen in the restructuring of the alliances on April 1. Since then only three alliances have been left and the number of calls has decreased. This makes the ports more dependent on the alliances. In the Mediterranean ports are already more than 50% dependent on the alliances. This makes the transport sector as a whole more vulnerable, says Olaf.

After Hanjin's bankruptcy last year and the huge delays in transport, shippers have become more alert to the financial results of the shipping companies. One of the alliances has set up an emergency fund to prevent delays in shipping should one of its members go bankrupt.

Another trend in recent years is shipping companies investing in their own terminals. In 2002 18% of the terminals was in the hands of a shipping company, in 2016 it has risen to 38%.

Sustainability doesn't seem to be a thing among shipping companies yet, says Olaf. He mainly sees a role for other links in the chain to move the shipping companies towards a more green path. The port company can work as a catalyst by adjusting the port money, dealing with concessions in terminals or pointing out other berths.