Understanding the 3 New Ocean Carrier Shipping Alliances
Learn How the New Carrier Alliances Affect Your Ocean Freight Contracts and/or Shipments.
The new ocean carrier shipping alliances are fully operational as of April 2017. These 3 carrier alliances represent nearly 80% of global container trade and roughly 90% of container capacity on major trade routes. The main trade lane that is highly affected by this change and the main reason for the new alliances is the North America-Asia a.k.a. “East-West” trade lane between the Far East and North America which will represent 96% of East-West trade. This post is focused more on the trade routes that related to North America.
If you employ an NVOCC or international freight forwarder to handle your ocean freight, or negotiate your carrier contracts on your behalf, this information will be useful in your decision making.
Major Shipping Trade Routes
The Trans-Pacific trade route is the largest trade route in the world by volume. It is the route between the Far East and North America, mainly dominated by containers hitting US West Coast ports.
The Asia-Europe is the trade route between Asia and Europe (most going to Western Europe) with most vessels going through the Suez Canal.
The Trans-Atlantic trade route is the route between Europe and North America, mainly between Europe and the US East Coast.
What are the new Ocean Carrier Alliances?
Ocean Alliance CMA CGM, COSCO, OOCL, APL and Evergreen (APL is now owned by CMA CGM)
The Alliance: NYK Group, MOL, “K” Line, Hapag Lloyd, UASC and Yang Ming (UASC has merged with Hapag Lloyd)
2M Alliance: Maersk Line and MSC, with HMM and Hamburg Sud (Hamburg Sud is now owned by Maersk Line). HMM is not officially in the alliance, but they have slot purchases and exchanges with MSC as well as Maersk.
Weekly Sailings Per Carrier Alliance
“Ocean Alliance” will have 13 weekly services between Asia and the US West Coast, 7 weekly services between Asia and US East Coast and 3 Trans-Atlantic services. More information on Ocean Alliance can be found here.
“The Alliance” will have 16 weekly services for the Trans-Pacific trade and 7 weekly services for the Trans-Atlantic trade. More information on The Alliance can be found here.
“2M” Alliance, which has a slot agreement with Hyundai Merchant Marine, will have 16 weekly services. More information on the 2M Alliance can be found here.
What to be Aware of When Negotiating Service Contracts
When looking at negotiating a service contract with an ocean carrier, if you have specific lanes (i.e. routes, such as China ports to US West Coast ports or East Coast to the Mediterranean) or specific O/D (origin/destination) pairs (e.g. Chicago to Auckland) that you are looking to give a carrier, use this as a check list when negotiating:
- Check to make sure the carriers have the capacity on the routes to handle your freight.
- Check which carriers are operating vessels on that route – if you are negotiating with NYK for example, going from US West Coast to Vietnam, and most of the vessels are operated by “K” Line and Yang Ming, you may want to ensure NYK has the capacity to meet your requirements since the majority the first right of refusal is usually to the owner of the vessel when space gets tight or a vessel is overbooked.
- If possible, have a contract with 2 carriers within the same carrier alliance. This reduces your risk when it comes to capacity and space issues.
- If possible, have contracts with carriers from different carrier alliances on the same routes (e.g. CMA CGM from “Ocean Alliance” and NYK from “The Alliance”). This gives you flexibility and agility when there are space issues, changes in routings, transit times and pricing issues such as GRIs, free time, etc.
- Have the carrier’s sales rep continually update you on changes in schedules and routes.
- If you have consistent volume on a route and all the vessels on that route are not owned by the carrier whom you have the contract with, give them a commitment per week or month so they avoid rolling your bookings. Carriers like to have predictability and consistently in container volumes with shippers and NVOCCs.
- Which carriers offer you flat chassis fees for a specified period of days? This can be vitally important to save money on chassis fees when it comes to trucking, especially if you use chassis for 2 or more days. Most carriers have gotten out of the chassis business, but a select few such as MSC and Evergreen still offer flat chassis fees for a specified number of days.
- Not all routes are accessible with all carriers within the same alliance. Make sure the carrier you are signing a contract with is allowed to use space on another carrier within the alliance on a specific route. Not all carriers will allow other carriers from their alliance on their vessels on particular routes. For example, even though NYK is in the same alliance as Hapag Lloyd, it doesn’t imply you can book a container from Los Angeles to Asuncion with NYK, just because they are in “The Alliance” with Hapag Lloyd. Hapag may not allow NYK containers onto their vessels to Latin America (this is just an example).
- An alternative to a service contract is a special quote with a carrier to ensure you like their service and to minimize the need to sign a contract that has an MQC (minimum quantity commitment) with a penalty if you don’t meet the minimum. You can ship on a special quote until you have the confidence and/or volume to meet a service contract MQC.
ZIM Integrated Shipping, Hamburg Sud, Pacific International Lines, Wan Hai Lines, and Matson who also operate on the Asia-North America trade lane will also be options to shippers and NVOCCs to sign contracts. These carriers’ routing are more susceptible to change since they have more agility to move around their vessel rotations and capacities but since they are independent, they can also have less issues with sharing space on their vessels compared to carriers that are in shipping alliances.