Alliances in Container Shipping

Alliances in container shipping
Alliances in Container Shipping, 1996-2020

Source: updated from Notteboom, T. (2012), Chapter 12: Container shipping, in: Talley, W. (ed.), The Blackwell Companion to Maritime Economics, Wiley-Blackwell Publishing, ISBN: 978-1-4443-3024-3, pp. 230-262.

Operational cooperation between container shipping companies comes in many forms ranging from slot-chartering and vessel-sharing agreements to multi-trade strategic alliances. The first strategic alliances between shipping lines date back to the mid-1990s, which coincided with the introduction of the first post-Panamax container vessels in the Europe-Far East trade. In 1997, about 70% of the services on the main East-West trades were supplied by the four main strategic alliances. As of 2020, three alliances are operational globally: 2M, Ocean Alliance, and THE Alliance.

The main incentives for shipping lines to engage in strategic alliances are the need for critical mass in the scale of operation, enhancing global reach, improving fleet deployment, and spreading risks associated with investments in large container vessels. The alliance partnerships evolved due to mergers and acquisitions, such as the merger between P&OCL and Nedlloyd, the take-overs by P&O Nedlloyd and SeaLand by Maersk, and the market entry and exit of liner shipping companies.

Initially, many of the largest carriers did not opt for alliance membership. These carriers reached a sufficient scale to benefit from the same economies of scale and scope that strategic alliances offer. The top six carriers, Maersk Line, MSC, CMA CGM, and Evergreen, were notable examples. In comparison, the remaining two top-six carriers (COSCO and Hapag-Lloyd) have always opted for alliance membership despite the scale of their activities. Several shipping lines, such as Evergreen, stayed out of alliances for commercial independence and flexibility. In more recent years, even the largest shipping companies resort to alliances for their survival and to increase margins. The case of Evergreen demonstrates that even outsiders had to give in to alliance membership. However, strategic alliances are not stable and subject to circumstantial change. Individual shipping lines continue to show increased pragmatism when setting up partnerships with other carriers on specific trade routes.

The three alliances (2M, THE Alliance, and Ocean Alliance) play a key role in capacity management on the main East-West routes. Alliances have been under legal scrutiny by the EU recently. In 2009, the EU adopted a Consortia Block Exemption Regulation (Commission Regulation (EC) No 906/2009), allowing shipping companies to operate joint liner shipping services. This regulation was prolonged in 2014 by five years and was due to expire on 25 April 2020. After a lengthy and heated public consultation launched in September 2018, the EU decided in late 2019 to prolong the regulation for another four years till 25 April 2024.