In my 42-plus years in the industry, I’ve seen many variations of what we now call alliances — joint services, slot-charter arrangements, vessel-sharing agreements, alliances and now mega-alliances — and more no doubt will follow.
These arrangements have existed for years, yet many people act as though the concept is new. I tend to forget that few people in the industry today have actual experience or historical knowledge of these events, so when I share my experiences, questions and concerns arise about three main topics: lack of real selection of different services, the competitiveness of alliance members and the impact of mega-vessels on terminals and the ability to access cargo.
For the record, Trio (Ben Line, Hapag-Lloyd, MOL, NYK and OCL), Scan Dutch (EAC, Nedlloyd, Brostrom, Wilhelmsen and CGM) and ACE (FBS, Nedlloyd, Brostrom, WiIlhelmsen and KSC) were three alliances operating in the 1970s and 1980s, primarily in the Asia-Europe markets.
But it wasn’t many years before that alliances didn’t exist, and the selection of carriers was far fewer in any given trade lane. The VSAs and joint services gave shippers access to carriers that never served certain trades, while giving carriers access to new markets.
One concern I hear often is that alliances limit the selection of carriers. From my perspective, there are many carriers to choose from, even those that may share the same vessels, as carriers do in the G6 Alliance.
Yes, they’re operating the same vessels port to port, but what cargo really moves port to port? Cargo has an origin and destination outside of the port, and there are pre- and post-services beyond the vessels.
Booking, equipment, documentation, and inland services are all part of the true services, as is problem resolution (How do the carriers react to something going wrong?). And the G6, P3 and CKYH alliances, as well as independents such as China Shipping, United Arab Shipping Co, Evergreen, Wan Hai, PIL and US Lines, offer many service strings in trades such as the eastbound trans-Pacific.
On the issue of competitiveness, the G6 is the combination of two existing alliances, and no one can say the carriers haven’t been competitive with each other. Maersk Line, Mediterranean Shipping and CMA CGM are all fighting to be the world’s No. 1 ocean carrier, and that won’t stop with the advent of that alliance.
For the skeptical, the P3 as constituted accounts for 15 percent of global containerized capacity, while the three carriers independently have nearly 37 percent of the global containerized capacity, meaning more than 60 percent of their combined capacity operates outside the P3. For sure, they will be the dominant carriers in the Asia-Europe market from a capacity perspective, a little less so in the trans-Atlantic, but second to the G6 in the trans-Pacific.
With forecast supply-demand ratios, getting competition from the carriers won’t be an issue.
So my take on mega-alliances is positive. They will provide a variety of services with significant space and equipment in major trades at cost levels far more attractive than carriers would be operating as separate entities. With one or two exceptions, they couldn’t get close to providing those services, especially at the cost levels through the alliances.
Finally, on the issue of the impact resulting from mega-ships calling U.S. ports and terminals, there is no doubt a 12,000-TEU vessel takes longer to unload than a 4,000-TEU ship — that’s simple logic. But what happened to the other 8,000 TEUs of cargo if the smaller 4,000-TEU ships were deployed? Shipments would be coming on ship No. 2 and ship No. 3.
Would this occur at the same time and place, with unloading and/or loading occurring concurrently?
Of course not. The issue isn’t the mega-vessels; it’s the throughput in the terminals. Working 12,000 TEUs takes “x” amount of time, period. It may even be slightly faster on a 12,000-TEU ship because there is no waiting while one vessel clears the berth and another waits. That’s really a small matter. The big matter is that U.S. West Coast port productivity is, simply, slow — about 28 moves an hour per crane vs. 35 or more at most U.S. East Coast ports and far less than the Chinese and other Asian and European ports that regularly get more than 40 and 50 moves per hour.
In addition, most ports in Asia work 24/7, making the productivity of their terminals far superior to West Coast ports. The International Longshore and Warehouse Union wants to protect union jobs and head count, and one way to do that is to not exceed 28 moves an hour. Another option is for the ILWU to arrange with the Pacific Merchant Shipping Association and terminal employers to move 40 an hour but protect jobs through training on other work.
Becoming more efficient also could help West Coast ports win back some market share lost to East and Gulf Coast ports in the past few years. That would be another way to ensure head count doesn’t dwindle.
As we’ve read and heard, especially at last month’s TPM Conference, if something isn’t done about the mess up and down the West Coast, more cargo will be lost, and once lost, it’s difficult to get it back. Poor productivity can’t be blamed on mega-ships or mega-alliances.
Gary Ferrulli, a 40-year shipping industry veteran, is director ocean product for non-vessel-operating common carrier Ocean World Lines, a subsidiary of Pacer International. Contact him at email@example.com. The views expressed here are his own and do not necessarily reflect those of OWL.