Ocean Three: last piece in the jigsaw

However its success, says the specialist research and advisory organisation, like all other vessel sharing agreements (VSAs), will depend upon not only achieving the unit cost savings but also on how well the partners can work together.

The coming together of CMA CGM with China Shipping Container Lines (CSCL) and United Arab Shipping Company (UASC) was widely anticipated after the decision in June of Maersk and MSC to jettison CMA CGM in their ten-year 2M vessel sharing agreement, that replaced the original P3 network plan.

Having been left out in the cold by its P3 partners, CMA CGM had to find new carriers to help fill its big ships. With virtually every other carrier already part of an alliance there were few alternatives available, says Drewry.

The Ocean Three agreement will cover the key East-West container trades out of Asia to and from North Europe, the Mediterranean and both coasts of North America, effective end 2014 or early next year.

Ocean Three is subject to regulatory approval but they should have no problem as its current market share is less than 30 percent on all routes, explained Drewry. Drewry's analysis also shows that Ocean Three will have its largest share on the Asia-Mediterranean trade route with 27 percent of all effective westbound vessel capacity, based on current service offerings of the three partner lines.

Drewry notes that almost all East-West routes are now completely locked down by alliances with virtually no room at all for independents.

According to Drewry's data, the route between Asia and North Europe will be dominated by the proposed 2M alliance with 32 percent of capacity. That is followed by the CKYHE alliance of Cosco, K Line, Yang Ming, Hanjin Shipping and Evergreen with 26 percent; the G6 alliance of APL, Hapag-Lloyd, HMM, MOL, OOCL and NYK with 23 percent, and finally the newly-created Ocean Three with 19 percent.

Therefore Ocean Three can be seen as the last piece in the alliance jigsaw for the foreseeable future. This is not to say that there will be only four competitors left on these routes, however. Each carrier will continue to compete against all other carriers inside and outside of its alliance.

The trend towards these so-called "mega-alliances" is a defensive response to the prolonged down cycle for industry profits, as carriers have realised there is safety in numbers.

With little prospect for mergers and acquisitions among the major players, alliances are the halfway house towards consolidation that many in the industry believe is necessary to secure future profitability.

However, says Drewry, with the game of musical chairs now over it could be that these mega-alliances actually set up a barrier to large-scale mergers and acquisitions as buying a rival from a different alliance could well increase the market share balance to unacceptable levels.

Drewry's opinion is that although these alliances are often reported as global in scope, VSAs are focusing on the East-West trade. The incorporation of North-South routes in the future is unlikely, says Drewry, since the same pressures do not apply in those trades.

With regards to customer service and reliability, Drewry says that the Ocean Three carriers have an advantage over the 2M carriers - Maersk and MSC - who have vastly different track records on ship reliability.

The underlying motivation of the Ocean Three, as with all of the other mega-alliances is the quest for economies of scale and to reduce slot costs. In Drewry's view, Ocean Three will have an extensive East-West network (although not quite as wide as 2M's), a large share of the East-West markets, superior access to big-ship costs advantages and no apparent incompatibility between the schedule reliability objectives of its members.

Yet ultimately the success of each alliance will depend on how these often disparate companies in terms of ownership structure, nationality and culture can operate together, adds the maritime research provider.

Drewry suggests that having a single leader to orchestrate operations is preferable when needing to make quick decisions, hence why the P3 wanted to set up a single independent operational centre. On the basis of the fewer the chiefs the better, Drewry believes that 2M would appear best placed of the alliances, with Ocean Three not far behind.

ww.drewry.co.uk