In the fourth quarter of 2016, overall ocean carrier capacity fell slightly in two of the three major east-west trades, a sign carriers are still trying to get back on track following a tumultuous third quarter in which capacity plummeted as a result of Hanjin Shipping’s bankruptcy announcement in August 2016. Even so, deployment in fourth quarter 2016 was nearly identical to capacity figures for 2015.
Still reeling from an unstable market, which saw the collapse of Hanjin, low freight rates, weak cargo demand, and persistent overcapacity, landscape of the container shipping industry continued to change during the fourth quarter with additional mergers and acquisitions. News broke in October that Japanese carriers MOL, NYK and “K” Line will combine their container operations in a push to remain competitive in a market where scale has become paramount. Bulk/LNG carrier Korea Line in November signaled its intentions to enter the industry, outbidding fellow South Korean carrier Hyundai Merchant Marine (HMM) for operation of a handful of Hanjin’s previous transpacific vessels.
Later in the year, industry leader Maersk Line reached an agreement to purchase German liner carrier Hamburg Süd, along with subsidiaries CCNI and Alianca. The sale of Hamburg Süd, a north-south specialist and one of the larger carriers previously without a home within the upcoming OCEAN, 2M and THE alliances is set to be completed by late 2017, subject to the relevant regulatory approvals. In an added twist, HMM’s participation in the 2M Alliance was put into question, as it was disclosed that they will not be an official member of the vessel sharing agreement with Maersk and MSC, but will instead participate in a slot exchange/charter agreement with the carriers and will not operate any vessels within the 2M.
According to the latest quarterly World Liner Supply Report
from BlueWater Reporting
, weekly capacity from Asia to the West Coast of North America increased 1.9 percent during the quarter, from 261,639 TEUs at the end of Q3 2016 to 266,604 TEUs at the end of Q4 2016. Deployed weekly capacity from Asia to the East Coast of North America, on the other hand, fell 5.9 percent, from 122,408 TEUs at the end of the third quarter to 115,212 TEUs at the end of the fourth quarter, after a 3.2 percent jump the previous period.
BlueWater Reporting tracks the weekly TEU capacity of competitive direct liner services on 30 individual lanes operating between Asia, Europe, and North and South America for the WLS report, taking into account skipped sailings and slow steaming, and estimates the allocation of that capacity within each specific trade lane. BlueWater’s quarterly World Liner Supply Reports
are designed to help ocean carriers, non-vessel-operating common carriers, freight forwarders, shippers, ports and analysts monitor trends in ocean liner shipping capacity.
The report includes carrier group services operated by the 2M Alliance of Maersk Line and MSC, the Ocean3 Alliance of CMA CGM, China Shipping (now part of COSCO) and United Arab Shipping Co. (UASC) as well as the G6 and CKYHE alliances. Hanjin capacity was removed from the data set in the third quarter as most of the firm’s vessel assets have been sold or returned to ship lessors as part of its bankruptcy liquidation.
The fourth quarter also gave us a glimpse of what we can expect from the new alliances, set to begin operations in April 2017, in terms of their service networks. OCEAN Alliance members COSCO, CMA CGM, Evergreen Line and OOCL said their network will include 41 services covering the following routes: 20 transpacific, 11 Asia-Europe/Med, three transatlantic and seven Asia-Mideast/ISC loops. Approximately 350 vessels will operate within these 41 routes with roughly 3.5 TEUs in deployed capacity. THE Alliance members, Hapag-Lloyd, Yang Ming, NYK Line, MOL and “K” Line plan to operate 240 vessels with average capacity ranging from 3,000 TEUs to 14,500 TEUs on 31 services - 16 in the transpacific, eight in the Asia-Europe/Med trade, six in the transatlantic and one between Asia and the Middle East.
It remains to be seen if the 2M Alliance will make any major overhauls to their service network as a result of these announcements or their new slot exchange/charter agreement with HMM. According to BlueWater, the 2M currently operates 21 services - nine transpacific, seven Asia-Europe/Med and five transatlantic strings. They have a total of 206 vessels between these services with an aggregate capacity of 2 million TEUs. Once these alliance changes are put into effect, the current cooperative agreements between the global container carriers will be overhauled completely, making quarterly and year-over-year comparisons more difficult.
Overall weekly capacity in the eastbound transpacific trade lane decreased 0.59 percent to 381,816 TEUs by the end of the fourth quarter after a third quarter in which weekly deployment stood at 384,047 TEUs. Member carriers of the CKYHE Alliance saw their overall market share drop for a third straight quarter, from 31.87 percent to 31.60 percent with weekly deployment dipping from 122,395 TEUs to 120,639 TEUs (1.4 percent) due to the removal of all Hanjin operated vessels from service. As a result, the CKYHE Alliance is no longer the frontrunner in this trade in terms of market shared the G6 Alliance carriers continued to lead the pack in capacity and market share at the end of the fourth quarter. Deploying 133,454 TEUs per week at the end of the fourth quarter compared with 128,570 TEUs per week at the end of the third quarter, combined G6 market share in the trade grew from 33.48 percent to 34.95 percent.
With the G6 and CKYHE alliances continuing to claim the top two spots in transpacific market share, the 2M Alliance's combined percentage of the total market saw a slight jump, increasing from 18.01 percent to 18.28 percent, even with a minor decrease in weekly capacity, from 70,212 TEUs to 68,747 TEUs. Ocean3 market share, which has been declining incrementally each quarter since the end of Q4 2015, decreased once again from 10.83 percent to 10.58 percent. Non-alliance affiliated carriers saw capacity drop sharply from 21,270 TEUs to 16,364 TEUs during Q4 2016, causing their combined market share to drop to 4.29 percent compared to 5.54 percent in Q3. Overall, the CKYHE Alliance is the only major carrier group which did not increase weekly capacity the transpacific trade during the fourth quarter.
In the highly-competitive Asia-North Europe trade, overall weekly capacity ticked up less than 1 percent, from 220,835 TEUs to 221,195 TEUs. Unlike in the transpacific, the 2M and G6 alliances experienced a slight downturn in market share at the close of Q4 2016, though the 2M still maintained its overall lead in the trade. Combined market share for the 2M fell from 34.45 percent to 33.88 percent as member carriers decreased deployed capacity from 76,070 TEUs to 74,941 TEUs. The G6 Alliance’s overall market share also took a slight hit, slipping from 20.98 percent to 20.75 percent as their deployed capacity fell from 45,930 TEUs to 45,899 TEUs. Ocean3 carriers saw an uptick in weekly deployed capacity, from 48,546 TEUs in Q3 2016 to 48,720 TEUs in Q4 2016, and continued to maintain their lead on the G6 Alliance, growing their combined market share from 21.98 percent to 22.03 percent in the process. Non-alliance lines continue to have no involvement in the westbound Asia-North Europe trade, with the exception of a few slot-purchasing agreements.
Overall capacity in the transatlantic trade also dropped slightly, decreasing 3.7 percent for the quarter, from 72,109 TEUs to 69,459 TEUs. Weekly deployed capacity in the trade was also down 3.7 percent compared with the end of Q4 2015. The 2M Alliance members maintained the top spot in the trade even with a minor decrease in weekly deployed capacity, from 27,029 TEUs to 24,098 TEUs. Market share for the 2M dipped from 37.48 percent to 34.69 percent during the period. Combined G6 market experienced a slight boost, from 35.08 percent to 36.62 percent, as the member carriers added 139 TEUs of weekly capacity, deploying 25,433 TEUs at the end of Q4 2016 compared with 25,294 TEUs at the end of Q3 2016. Ocean3 carriers maintained the third most capacity in the trade, increasing their market share slightly from 12.63 percent to 13.13 percent as member carriers deployed 9,122 TEUs per week, up slightly from 9,110 TEUs per week the previous quarter. Weekly deployed capacity remained unchanged for members of the CKYHE Alliance at 5,825 TEUs per week for the seventh consecutive quarter. CKYHE carrier market share did increase marginally from 8.08 percent to 8.39 percent, however, while the market share of non-alliance lines rose slightly from 6.73 percent in Q3 2016 to 7.17 percent Q4 2016. Non-alliance affiliated carriers removed 130 TEUs of weekly deployed capacity in the transatlantic trade, decreasing from 4,851 TEUs at the end of Q3 2016 to 4,981 TEUs at the end of Q4 2016.
The 2016 Fourth Quarter World Liner Supply Report is downloadable in Excel spreadsheet form here
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