Container Lines to Form Asia-focused Ocean Alliance

CMA CGM

By Reuters 2016-04-20 17:50:23

China COSCO Shipping and France's CMA CGM sought to reinforce their growing global scale in the container line market on Wednesday in a partnership that targets savings on crucial Asia routes during a severe shipping downturn.

Set to be larger in capacity than a rival grouping of Maersk Line and Mediterranean Shipping Co, their "Ocean Alliance" will bring together COSCO Container Lines, CMA CGM, Taiwan's Evergreen Line and Hong Kong-based Orient Overseas Container Line.

An industry shake-up had been expected after the creation of China COSCO Shipping through a state-led merger and following CMA CGM's deal to acquire Singapore's Neptune Orient Lines (NOL).

"All of us had the same wish to create a new alliance after our current alliances expired," COSCO Container Lines' deputy managing director, Zhu Jiandong, told reporters in Shanghai.

Container shipping has seen alliances develop as the industry struggles to recover from a slump in freight rates linked to a glut of ships and slowing Chinese economic growth. Such alliances involve lines sharing certain vessels and routes.

"I can see a lot of changes among the shipping alliances as liner companies regroup and position themselves, but at the same time regulators will be watching closely," said John Lu, chairman of the Singapore National Shippers' Council.

Set to begin in April 2017 following regulatory approval, the Ocean Alliance will run for five years and involve a fleet of 350 container ships with an estimated capacity of 3.5 million TEU, he said.

This would make the new partnership bigger in capacity than Maersk Line and MSC's rival 10-year vessel sharing agreement which has a fleet of 185 ships and capacity of 2.1 million TEU.

CMA CGM said the alliance would offer "the largest number of sailings and port rotations connecting markets in Asia, Europe and the United States."

In a first stage, the operations would offer more than 40 services, it said.

Neither COSCO nor CMA CGM gave estimates on potential savings.

CMA CGM is currently part of the "Ocean Three" alliance with China Shipping Group and United Arab Shipping, a deal that expires at the end of this year.

As it seeks approval from European Union regulators for its $2.4 billion takeover of NOL, CMA CGM had offered to withdraw NOL from competing alliances, people familiar with the matter said this month. CMA CGM declined to comment.

CMA CGM is the world's third-biggest container line and the NOL takeover would narrow the gap with market leader Maersk and number two line MSC.

China COSCO Shipping Corporation was created from China Ocean Shipping (Group) Company's (COSCO) merger with China Shipping Group.

COSCO is currently part of the CKYHE container alliance that includes Evergreen and which also expires at the end of 2016.