What are shippers to do with capacity changes? Unreliability adds to the supply chain erosion caused by container lines.
WLS: Capacity falls in east-west trades
After a relatively stable third quarter, overall container capacity in the major east-west trades fell across the board in the fourth quarter of 2014. The G6 Alliance surpassed the CKYHE Alliance in terms of market share by weekly allocated capacity in the westbound Asia-North Europe trade lane, though both still trail the combined capacity of 2M vessel-sharing agreement partners Maersk Line and Mediterranean Shipping Co. (MSC). In addition, the pending 2M VSA wrestled the top spot away from the G6 Alliance in the transatlantic westbound trade, according to the latest quarterly World Liner Supply Report from BlueWater Reporting.
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 pending 2M alliance of Maersk Line and MSC and the pending Ocean Three alliance of CMA CGM, China Shipping and United Arab Line for comparison. Both alliances are scheduled to go in effect later in this month.
Capacity in the eastbound transpacific trade lane fell after increasing for two consecutive quarters. An estimated 259,800 TEUs were allocated to the trade on a weekly basis by the end of Q4 2014, down 13,675 TEUs (just over 5 percent) from 273,475 TEUs at the end of Q3. The overall decrease in weekly allocated capacity was shouldered mainly by the leading competitive carrier groups in the trade, the CKYHE Alliance and, to an even greater extent, the G6 Alliance. The combined weekly allocated capacity of the CKYHE Alliance fell by 6,464 TEUs, from 99,606 TEUs at the end of the third quarter of 2014 to 93,142 TEUs at the end of the fourth quarter, decreasing the group’s market share from 36.42 percent to 35.85 percent in the process. The CKYHE Alliance remained the leader in the trade, however, as the G6 Alliance withdrew even more weekly capacity from the transpacific, decreasing from an estimated 96,391 weekly TEUs at the end of Q3 2014 to 86,015 TEUs at the end of Q4, a difference of 10,376 TEUs. This decrease caused the G6 Alliance to lose about 2.14 percent of total market share, falling from 35.25 percent at the end of Q3 2014 to 33.11 percent at the end of Q4.
By comparison, the pending Ocean Three and 2M carrier groups decreased capacity only slightly, by 1,916 TEUs and 553 TEUs, respectively, and as a result, both groups actually increased their total percentage of market share, though both remain at a significant disadvantage to the CKYHE and G6 alliances in the trade. The combined market share of the Ocean Three carriers increased a meager 0.05 percent, from 14.97 percent at the end of the third quarter to 15.02 percent at the end of the fourth quarter, while the 2M partners increased their market share from 11.98 percent to 12.39 percent, a slightly more significant difference of 0.41 percent.
Somewhat surprising, non-alliance affiliated carriers increased their combined capacity in the transpacific, despite the fact that the few remaining independent carriers continue to be either assimilated into larger alliances and VSAs, or pushed out of the major east-west trades altogether, as ZIM was in the Asia-Europe lane, by their much larger competitors. The combined market share of carriers not currently participating in one of the large-scale alliances or VSAs grew from 1.39 percent at the end of Q3 2014 to 3.63 percent at the end of Q4, thanks to a 5,634-TEU increase in weekly allocated capacity, from 3,802 TEUs to 9,436 TEUs in the same time period.
Likewise, in the Asia-North Europe westbound trade, overall capacity also decreased by just over 5 percent after a relatively steady third quarter, which followed two straight previous quarters of growth. Estimated weekly allocated capacity in the trade fell 11,456 TEUs, from 227,111 TEUs at the end of Q3 2014 to 215,655 TEUs at the end of Q4 2014. In terms of market share, the combined capacity of 2M member carriers Maersk and MSC still led the way, managing to increase slightly from 29.48 percent at the end of the third quarter to 30.26 percent at the end of the fourth quarter, despite the fact that the carriers actually withdrew 1,704 weekly TEUs from the trade. The CKYHE and G6 alliances continued to fight it out for second place, however, as the G6 Alliance member carriers surpassed the CKYHE in terms of market share despite a slight decrease from 25.39 percent at the end of Q3 2014 to 25.33 percent at the end of Q4. This was mainly a result of the CKYHE Alliance carriers decreasing their combined weekly allocated capacity from Asia to North Europe from 59,207 TEUs to 53,958 TEUs, which caused the group’s market share to fall from 26.07 percent to 25.02 percent, giving the G6 a slim 0.31 percent lead for the time being. Still coming in last, though not by an insurmountable sum, is the Ocean Three VSA, whose member carriers sport an estimated combined weekly allocated capacity of 41,807 TEUs, down 1,477 TEUs since the end of the third quarter, giving them a 19.39 percent share of the total market, up 0.33 percent since the end of the third quarter. Unfortunately for non-alliance lines, the westbound Asia-North Europe trade lane remains exclusive to the larger alliances and VSAs, as independent lines have exited the trade entirely, save for a few slot-purchasing agreements, claiming that it is no longer profitable for those operating on a smaller scale.
Overall capacity in the westbound transatlantic also fell slightly for the second straight quarter after a significant increase from Q1 2014 to Q2 2014. Carriers decreased weekly allocated capacity in the trade from 65,929 TEUs at the end of the third quarter to 61,143 TEUs at the end of the fourth quarter, a decrease of just over 7 percent, nearly double the decrease seen in the trade last quarter. The member carriers of the 2M VSA managed to secure the top spot in the trade in terms of market share, increasing its percentage of weekly allocated capacity from 39.72 percent to 43.13 percent as the G6 Alliance’s market share fell from 42.76 percent to 38.51 percent.