Business / Companies

COSCO set to reshape shipping alliances

By Zhong Nan (China Daily) Updated: 2016-02-27 10:06

Sino-French container partnership could challenge 2M's dominance of East-West trade

Newly formed China COSCO Shipping Corp Ltd and France's CMA CGM SA are reported to be planning a new container partnership to challenge the huge 2M alliance.

Formed by Denmark's Maersk Line and Switzerland's Mediterranean Shipping Co SA, the 2M operates more than 2.1 million twenty-foot equivalent units (or TEUs, the industry measurements of capacity of container ships and terminals), and owns 193 vessels.

According to Alphaliner, a French maritime research firm, however, the Chinese and French firms are also seeking to rope in another two shipping companies within their "French-Asian Alliance" plan, in a group which would have an estimated 3 million TEUs.

Their two other partners would be Orient Overseas Container Line of Hong Kong and Taiwan-based Evergreen Line.

Dong Liwan, a shipping industry professor at Shanghai Maritime University, said the plans could also potentially split up three of the current four main East-West alliances - 2M, O3, CKYHE and G6.

"If completed, the proposal would effectively rearrange the current shipping-line map, and leave other remaining carriers of the O3, CKYHE and G6 alliances in a swayable situation," said Dong.

The O3 alliance composes the old China Shipping, the Marseilles-based CMA CGM, the world's third-largest container company and United Arab Shipping Co.

CKYHE is made up of the previous COSCO, Kawasaki Kisen Kaisha Ltd, Yang Ming Marine Transport Corp, Hanjin Shipping Co Ltd and Evergreen Line.

While the G6 groups Orient Overseas Container Line, American President Lines Ltd, Hapag-Lloyd, Hyundai Merchant Marine, Mitsui OSK Lines and Nippon Yusen Kabushiki Kaisha.

China COSCO Shipping brought together China's two biggest State-owned shipping conglomerates: China Ocean Shipping (Group) Co and China Shipping (Group) Co.

Yin Zhen, deputy director of transport planning at the Institute of Comprehensive Transportation at the National Development and Reform Commission, said CMA CGM is keen to form an all-new alliance with China COSCO Shipping as it wishes to grow its container orders, after a previous proposal by the earlier P3 alliance, made by Maersk Line, Mediterranean Shipping and CMA CGM, was rejected by the Chinese government in 2014.

"China COSCO Shipping wishes to form a stronger alliance that can challenge 2M's ascendancy in the East-West trading route, as well as cut connections with certain weak partners within the current alliances to prevent further financial losses," said Yin.

A company spokesman from China COSCO Shipping's headquarters in Shanghai said its two constituents will remain within these two other alliances, until China COSCO Shipping has fully completed its integration process.

"Forming a bigger union can effectively offset lower volume growth and overcapacity. China COSCO Shipping will choose future partners carefully to establish a powerful shipping alliance amid current global trade and industrial setting," the spokesman said.

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