CMA CGM heralds service additions to the Ocean Alliance

The Ocean Alliance, a collective ocean carrier concern comprised of COSCO Shipping, CMA CGM, Evergreen Marine, and Orient Overseas Container Line Limited (OOCL) introduced a new offering this week, entitled the Ocean Alliance Day 3 Product.

The Ocean Alliance formally launched in April 2017 and serves as the world’s largest operational agreement between ocean carriers. Through this agreement, its member carriers can share vessels, charter and exchange space on each other’s ships, and enter into cooperative working agreements in international trade lanes between the United States and ports in Asia, Northern Europe, the Mediterranean, the Middle East, Canada, Central America, and the Caribbean.

This offering, which was announced by CMA GGM CEO Rodolph Saadé, will go into effect in April, and will “further strengthen the CMA CGM Group’s service [offering], he said.

CMA CGM said that the Ocean Alliance represents the world’s largest operational agreement between shipping companies, adding that 111 of the Ocean Alliance’s 330 container ships will be deployed by CMA CGM.

Building on the success of the previous Ocean Alliance’s product, the Day 3 Product will bring the CMA CGM Group’s clients an optimized offer through: the use of around 330 container ships, 111 of which will be operated by the CMA CGM Group, which continues to play a major role within the alliance, 38 services, and an estimated carrying capacity of around 3.8 million TEU (Twenty-foot Equivalent Unit containers),” said CMA CGM.

And the company added that the evolution of the Ocean Alliance puts a major emphasis on customer service, including:

• being the largest service offer on the Transpacific trade with 19 services;
• a strengthened offer between Asia and Europe with the addition of a 7th service;
• a large offer between Asia and the Mediterranean with 4 services;
• 2 Transatlantic services linking North Europe to the East Coast of the United States and the Gulf of Mexico;
• being the only alliance offering 4 services between Asia and the Middle East; and
• 2 Asia-Red Sea services

“This new agreement with our Asian partners will enable us to propose to our customers an unrivaled and competitive service offering,” said Saadé in a statement. “It is a milestone in our development strategy. It reinforces the CMA GGM Group in its key position within the industry.            

Chris Rogers, research director for global trade intelligence firm Panjiva, wrote in a research note that the Ocean Alliance’s Day 3 package deploys fewer ships and services than previous offerings, with the number of ships down to 330 from its previous Day 1 package’s 350 ships, with the number of services, at 38, up compared to Day 1’s 31, while increasing the capacity available on all routes to 3.8 million TEU compared to Day 2’s 3.6 million TEU.

“That reflects the wider trend towards larger vessels across the industry, as well as a rationalization away from less profitable routes,” wrote Rogers. “The process of service updates may change further…as the container lines seek to rebuild their profit margins. Panjiva’s analysis of company financial data shows the four firms’ revenues climbed 41.1% in the four quarters to 3Q 2018 compared to calendar 2016, in part driven by increased shipments handled by the alliance.”

And he added that based on Panjiva’s data, the Ocean Alliance has lost ground to the 2M Alliance, its primary competitor made up of Maersk and MSC, as U.S. seaborne imports for the Ocean Alliance rose 8% in 2018, compared to 2M’s 13.1% But the Ocean Alliance, said Panjiva, outpaced, THE Alliance, an ocean carrier concern made up of Hapag-Lloyd, K Line, MOL, NYK, and Yang Ming, whose U.S. seaborne imports increased 3.1% in 2018.

“A bigger challenge for 2019 will come from antitrust reviews – particularly in the EU – of the block exemption from competition laws granted to the shipping alliances,” wrote Rogers. “Given the three combined – of which Ocean was the largest – accounted for 82.9% of U.S. imports in 2018 there’s a risk that the alliances may be broken up if they don’t continually prove they’re competing effectively. It may therefore be difficult for the liners to rely on their alliances to boost profitability in 2019.”

Ben Hackett, founder of maritime consultancy Hackett Associates, downplayed the importance of this development.

“From what I can see, there is nothing new here other than that OOCL continued to maintain its own brand name plus a few extra services to suck up the spare capacity,” he said. “Loading these new services in an already crowded field will be hard.”