[Updated] Hapag-Lloyd Unveils THE Alliance

container ship

Published May 13, 2016 6:36 PM by The Maritime Executive

German container shipping company Hapag-Lloyd has announced a new international shipping alliance which is due to start up in April 2017 for initially five years, spanning 18 percent of global container fleet capacity.

The group, called THE Alliance, includes big Asian and European companies in the latest push for economies of scale in the troubled industry.

It will bring together Hamburg-based Hapag-Lloyd, Japan's trio Nippon Yusen Kaisha (NYK), Kawasaki Kisen Kaisha ("K"-Line) and Mitsui OSK Line (MOL) with South Korea's Hanjin Shipping, and Taiwan's Yang Ming Marine Transport.

Separately, Hapag-Lloyd is in ongoing merger talks with the United Arab Shipping Company (UASC), with view to that company also joining the alliance later. UASC would increase the overall alliance capacity to over four million TEU.

The new partnership will build one of the leading networks in the container shipping industry combining approximately 3.5 million TEU. All six partners operate advanced and competitive fleets with more than 620 ships in total. This will become the basis of a dedicated fleet deployed into the groups’ future service portfolio. 

“This agreement is a milestone and will enable the six partners of THE Alliance to offer sailing frequencies and direct coverage in the market,” member carriers said in a statement. “The unique product will feature enhanced port coverage in Asia, North America, Europe including the Mediterranean as well as Middle East. The network of THE Alliance will ensure frequent sailings, high reliability and very attractive transit times for all shippers in the East-West trade lanes.”

"Nowadays, you have to be in an alliance because you need these really big vessels to be competitive per unit cost," said Jan Tiedemann, an analyst with shipping consultancy Alphaliner.

"I am not sure if it's a marriage of partners who are deeply in love with one another, but they just have to join."

Friday's announcement follows closely that of the Ocean Alliance, announced in April, which comprises France's CMA CGM , newly merged China Cosco Shipping, Evergreen and OOCL (double O).

The Ocean Alliance is also due to start operations in April 2017 subject to regulatory approval, and follows a partnership by Maersk and MSC, known as M2, which started in early 2015.

"The market must come to its senses. Many participants find their financial means exhausted because of the ruinous competition," said Bodo Knop, managing partner with logistics consultancy SRTS. "... some players will quite possibly leave the market altogether."

Asked about the new alliance, Maersk chief commercial officer Vincent Clerc said consolidation made sense.

Hapag-Lloyd on Friday reported a net loss of 42.8 million euros in the first quarter of 2016.

Last month South Korea's Hanjin Shipping said it would ask creditor banks to restructure its debt.

Efforts to expand in markets such as South America have been hit by recession in Brazil and turmoil in Venezuela.