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Shipping Line Alliances Struggle

Is this a worrying sign of things to come......

The CKYHE alliance is expected to announce that it will blank out four Asia-North Europe voyages next month, joining rival alliances Ocean Three and G6 in cutting capacity during the traditional peak season for container lines.

The “unprecedented” voyage culls by the O3 and G6 equate to around 20% of each grouping’s weekly capacity, and the CKYHE move would remove about 11% of its weekly slot offering.

However, market analyst Alphaliner notes that the Maersk and MSC 2M alliance has no such plans for its six weekly Asia-North Europe sailings, despite vessel utilisation remaining weak, at 80-90%, and continued predictions of a “muted” peak season.

The other three alliances will remove a total of 18 sailings over the July/August period in an endeavour to redress the supply-demand balance and support general rate increases (GRIs).

In contrast, Alphaliner says, the 2M has increased its capacity for the period by the introduction of bigger ships on one string.

It explained that although 2M will downsize ships deployed on the AE9/Condor service, from an average of 9,500 teu to around 6,500 teu, this will only take effect from September. In the interim, Maersk and MSC will actually increase the size of the ships they operate on the string in August, with the deployment of several 11,000 teu and 13,000 teu ships.

Although it is common knowledge that MSC is reluctant to show commercial weakness by officially cutting capacity – indeed the announcement of the Condor string ship downgrade was spun by the Geneva carrier as a “service enhancement” – Maersk appears also to have decided to ride out the current crisis on the route, regardless of the impact on its average revenue.

Time will tell of course whether this proves the right strategy, but Maersk’s second-quarter results presentation on 13 August should provide some insight.

One thing is certain however, after six months of mega-alliance operation, as the current trading difficulties were not in the script when the carriers signed up, the financial strain must put an equal strain on relationships.

Notwithstanding the 2M’s current unwillingness to also cut Asia-North Europe capacity, Alphaliner argued that the number of cancelled sailings could help the carriers to secure a sufficient quantum of the 1 August GRIs of up to $1,050 per teu.

There is no doubt that the carriers desperately need as much of the increase as they can get and, more importantly, for it to stick.