NEWS

>> Transpacific - port coverage from April 1st.more.

>> Are direct services becoming less attractive for shipping lines?. more.

>> What happens to the small ships post Panama Canal expansion?. more.

>> Maersk to acquire Hamburg-Sud and reinforce its presence on the Latin America routes. more.

>>£0.5 trillion of trade passes through UK ports. More.

>> The future of rail freight and private investment. More.

>> The Northern Freight and Logistics report. More. 

>> Oxford Cambridge Expressway Study. More.

>> The potential impact of Brexit on trade. More.

>> India - the impact of shipping lines’ consolidation and the cabotage rule change. More.

>> Iran – changes in maritime services post-sanctions. more.

>> 'India: The only way is up' say MDST in an article published by Lloyds List. More.

>> Hanjin’s collapse - A wake-up call to the industry? More.

>> Peak season 2016: could the seemingly more rational shipping lines restore stability to the market?. More.

>> Panama Canal Expansion: the major announcements so far have been made by the CKYHE Alliance and G6 Alliance: each have indicated the upsizing of some of their vessels on the services passing through the Panama Canal as shown in MDS Transmodal's analysis. More.

>> CMA-CGM’s acquisition of Neptune Orient Lines and Cosco’s merger with China Shipping Container Line (CSCL), prompted the need for a few changes in the current capacity-sharing agreements amongst the shipping lines. More.

>> MDST has been appointed by Transport for the North (TfN), in partnership with York Aviation and Regeneris Consulting, to carry out a review of international passenger connectivity in the North of England. More.

>> Chris Rowland, Managing Director of MDST, presented the draft conclusions from the Transport for the North (TfN) Freight & Logistics Strategy at the Freight in the City Conference in Manchester on 3 March 2016. More.

>> With 22 maritime services, Iran is expected to see an increase of around 250% in the capacity of container shipping passing through its ports in spring 2016, as shipping lines seek to benefit from the removal of sanctions. More.

>> MDST Chairman, Mike Garratt, wrote to the editor of RAIL magazine in March about the future of rail freight in Great Britain. More.

>> MDST has examined the evidence for Chinese ‘dumping’ of steel on the global and UK markets using its World Cargo Database, which allows it to monitor world trade by both volume and value and for detailed commodities. More.

>> East Asia export box trade sees growth of 1.7% in 2015, says MDST in an article published by Lloyds List. More.

>> The UK Department for Transport (DfT) has published road traffic forecasts which used MDST’s GB Freight Model (GBFM) to develop forecasts to 2040 for HGV traffic on the British road network. More.

>> Ports should be at the centre of distribution chains says MDST. More.

>> Based on its analysis of Eurostat port statistics and its own World Cargo Database, MDS Transmodal has concluded that ports handled 640 million tonnes in 2014, a market share of 40%. More.

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CONTAINER SHIPPING

Changes in the container shipping landscape

CMA-CGM’s acquisition of Neptune Orient Lines, with its container activities operated under the well-established APL brand, and Cosco’s merger with China Shipping Container Line (CSCL), prompted the need for a few changes in the current capacity-sharing agreements amongst the shipping lines. These two events, highly significant in their own right, have now been followed by various other announcements and lots of speculation about further industry consolidation.

While the container shipping industry was celebrating 60 years of containerisation, CMA CGM, China Cosco, OOCL and Evergreen signed a memorandum of understanding on 20th April to form a new alliance - the Ocean Alliance.  Less than a month later, on 13th May, virtually all the other remaining global lines - NYK, Hanjin Shipping, Hapag-Lloyd, K Line, MOL and Yang Ming - announced that they will form a third group for a period of five years called THE Alliance. The latter agreement does not include Hyundai Merchant Marine but it may well be incorporated at a later date subject to improvements to the line’s financial position. It is also likely to embrace UASC as their discussions with Hapag-Lloyd on some form of merger or takeover continue.

These announcements imply that the new alliances could start in spring 2017, with their deployment schedules ready in time for the 2017 contracting season.

As they stand at the moment, none of the existing alliances on the East/West routes have a combined market share (in terms of capacity) of over 30%, as shown in Figure 1.

Figure 1: Deployed capacity, market share by alliance on the East/West routes - current agreements (excludes Far East – Middle East)

 Source: MDS Transmodal Containership Databank, 2016Q2

Annual deployed capacity of 49.5 MTEU, based on 2016 Q2

However, the latest ownership changes make it quite challenging for the biggest shipping lines to redefine their capacity-sharing agreements in such a way that their aggregated market shares remain below 30% on the major routes. Based on the current capacity deployed by the members that are intending to form the Ocean Alliance, we estimate that they could have a market share of 36% on the East/West routes (see Figure 2).

Figure 2: Deployed capacity, market share by alliance on the East/West routes – 2M,  Ocean Alliance and THE Alliance

 Source: MDS Transmodal Containership Databank, 2016Q2

Annual deployed capacity of 49.5 MTEU, based on 2016 Q2 *THE Alliance assumed to include UASC.

Note: the routes in this analysis are: Asia-North Europe & Mediterranean, Asia-North America and North Europe & Mediterranean-North America and include all routes operated in these markets by alliance members even when not explicitly included in the agreements.

The lines that were not within the 2M Alliance and the Ocean Alliance had to find a way to combine their resources in order to remain competitive.  Looking at the services on the East/West routes, an alliance between the Japanese lines alone (i.e. K-Line, MOL and NYK) would have been insufficient to capture a competitive share of the market. Based on the capacity deployed during the second quarter of 2016, we estimate that they would have a collective market share of less than 10%.  However, the three Japanese lines combined with Hanjin Shipping, Hapag-Lloyd and Yang Ming would secure a more robust 28% share, which could become 34% in the event of Hyundai and UASC joining THE Alliance.

How will the regulators react and what will the implications be for the container shipping industry?   If regulators allowed three alliances, then there might be the means of accommodating smaller lines within one of the alliances with a viable scale. However, if regulators insist on no fewer than four, then one or more might be uncompetitive given that 2M (at more than 25% on the East/West trade lanes combined) has already established the scale likely to be required for long term stable viability.

The next few months could be decisive in redefining the container shipping industry for many years to come.