Changing Alliances for Container Market

By | 11/02/2016

Changing Alliances for Container Market

New Mergers in Shipping Companies

CMA-CGM, world’s No.3 shipping company, has confirmed its decision to purchase APL while COSCO simultaneously enclosed deals to acquire CSCL’s container division. As of 2016, APL (G6) and CSCL (O3) will continue business under their respective alliances for the time being, but more changes are expected in 2017.

- Once M&As are complete on both sides, CMA-CGM and COSCO will have a increased market share of 11%, 8% respectively. This puts COSCO as the 4th largest global shipping company, surpassing Hapag-Lloyd in terms of market share.

<Global Container Market Share by (2015.07)>

Description

2M

CKHYE

G6

O3

ETC

North America Bound

MSK 9.6%

MSC 4.6%

HJS 7.5%

COSCO 7.8%

EMC 9.8%

YangMing 4.5%

K-Line 6.0%

HPAG 5.3%

HYK 4.2%

OOCL 4.9%

APL 6.9%

MOL 5.2%

HMM 4.1%

CMA-CGM 7.5%

CSCL 2.6%

UASC 1.7%

7.7

Total

14.3%

35.6%

30.6%

11.9%

7.7%

Europe Bound

MSK 19.0%

MSC 16.3%

HJS 4.8%

COSCO 5.9%

EMC 6.2%

YangMing 4.1%

K-Line 2.9%

HPAG 4.4%

HYK 3.1%

OOCL 2.3%

APL 3.3%

MOL 2.9%

HMM 2.4%

CMA-CGM 10.9%

CSCL 5.8%

UASC 4.5%

1.4%

Total

35.2%

23.8%

18.4%

21.1%

1.4%

Vessel Ratio (%)

28.5%

17.0%

18.4%

14.7%

1.4%

Source : Alphaliner

Projected Changes in Market Share

North American routes are largely under CKHYE (35.6%) and G6 (30.6%) while European routes are mostly taken by 2M(35.2%) and O3 (21.1%).

- Though final decisions are yet to be made, by 2017 projections show that APL’s shift will cause O3’s (11.9%) share increase to 18.8% in the North American trade route and CSCL’s shift will result in CKHYE’s (23.8%) share increase to 29.6%. This implies that G6’s share will decrease from 30.6% to 23.7% (North American Route) and 18.4% from 15.1% (European Routes) suggesting a major change in market share by alliance.

The two hefty M&As last year will not just change alliance landscape but also strengthen the companies that initiated the M&A. CMA-CGM’s market share in the North American routes will increase from 7.5% to 14.4%, and COSCO’s market share in European routes from 5.95% to 11.7%, strengthening company position in their each respective zones.

In overall perspective, 2M will maintain its position as the largest alliance, G6 will shrink to G5 followed by reduced market share, and O3 will also see slight cuts. The largest beneficiary of such change is CKYHE alliance of COSCO, with an impressive increase of 16.9% to 20.4%, making it the only alliance with greater market share than before.

- Major company’s in and out of an alliance leads to fundamental changes such as fleet composition, calling ports and other maritime services. Such implications, along with the recent merger of major shipping companies, may suggest an opportunity for a new alliance.

< Freight space and Market Share by Alliance >

Alliance

Freight Space (1,000 TEU)

Market Share(%)

Description

2015

2017

2015

2017

2M

5,687

5,687

28.7

28.7

 

CKYHE

3,351

4,046

16.9

20.4

CSCL transfer

G6

3,485

2,948

17.6

14.9

Become G5

O3

3,015

2,858

15.2

14.4

APL transfer

Source : Alphaliner

Maritime alliances show that economies of scale brings reduced costs at a significant level and thus can use it as leverage to pinch more market share. Such benefits is expected to leverage more momentum on the M&A recent trends.

Author: Jeon Hyeong-jin, Shipping Market Analysis Center Director
Source: KMI Shipping Market Trend Focus, No. 285