If you’ve heard about the changes to carrier alliances over the past few weeks, you may be wondering what all the fuss is about. The latest shake-up of partnerships between carriers is causing a fair bit of confusion in the industry, so here’s our summary of the changes and how they’ll impact freight forwarding and shipping in the UK, including a handy infographic that highlights the key information you need to know.
What are Carrier Alliances?
If you’re wondering, “what is a carrier alliance?” it’s similar to the way passenger airlines form partnerships with each other. The airlines you fly with organise themselves in alliances, which are partnerships with other airlines, to extend their coverage around the world. So you may book a KLM flight ticket, but Air France could operate the actual aircraft for example. Carrier alliances are the same, but instead of moving people around the world, they transport freight. Carrier alliances are vessel-sharing agreements, where the carriers (a firm that owns and operates shipping vessels) share their fleets of ships and move containers on each other’s behalf to extend their service offerings and geographic coverage.
What’s changing in April 2017?
Up until April 1st, 2017 there have been four carrier alliances, but from April 1st, 2017 these will be replaced by just three new alliances.
Introducing the new carrier alliances:
- 2M Alliance: Maersk Line and MSC (plus HMM and Hamburg Sud)
UK Ports of Discharge: Felixstowe and Southampton
- OCEAN Alliance: CMA CGM (inc APL), COSCO Shipping (merged company from COSCO and CSCL), Orient Overseas Container Line, and Evergreen Line
UK Ports of Discharge: Felixstowe and Southampton
- THE Alliance: Hapag-Lloyd (with UASC), MOL, NYK, K-Line and Yang Ming
UK Ports of Discharge: Southampton and London Gateway
These new carrier alliances will represent 77.2% of global container capacity, with the remaining 22.8% represented by independent vessel owners such as Pacific International Lines and Zim Line.
The new alliance capacity share between Asia and North Europe will be as follows:
- 40% controlled by 2M
- 35% by the OCEAN Alliance
- 25% by THE Alliance
The OCEAN Alliance offers 43 of the fastest/joint fastest transit times from Asia to North Europe, ahead of THE Alliance with 35 and 2M with 26. The 2M carriers have the most unique port pairs with 41, just beating the OCEAN Alliance which has 40 and THE Alliance with 32.
Central China will have the highest number of departures each week from the Far East with 131; there will be 118 from the Hong Kong/Taiwan/South China region, 98 from North Asia and 70 from Southeast Asia.
The most popular ports in Asia will be Shanghai with 58 weekly departures and Ningbo with 54. Busan has the most departures in North Asia with 32, ahead of Qingdao with 25.
How does this affect UK imports and exports?
In the United Kingdom, the new alliance structures provide a more even split of UK ports. Southampton port will see an increase of 9% of vessels, a 17% increase in average vessel size and ten inbound calls, closely followed by Felixstowe with nine inbound calls.
For the very first time, London Gateway gets its first deep-sea connections as THE Alliance has opted to use it for 2 Asia – North Europe services and two transatlantic loops. The introduction of London Gateway should give customers in and around London an advantage for UK haulage, and it’s also the last port of call in Europe from the Far East, which will be very positive for export transit times from London Gateway to the Far East.
Overall there will be a capacity increase of 10% on the Far East to Europe trade. Despite mostly positive changes, 50% of the services on the OCEAN Alliance and THE Alliance from the Far East to Europe will change from direct to transhipment, which means some transit times will be slower than before. While there is sufficient overlap to and from the busier import and export regions, there are still some areas with limited competition from the alliances.
Understanding these alliances and how they operate is crucial to understanding global trade. If you use a freight forwarder, remember they’re the experts, and you should be able to rely on them to understand how the new carrier alliances affect the cost of shipping freight to and from the UK as well as the speed of transit and ports of discharge. If you’re not sure how the new alliances will affect your operations and supply chain, please get in touch, our team will be delighted to talk you through the changes.
April 2017 Carrier Alliances
An Infographic by John Good Logistics
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