Radical changes to the shape and structure of the container shipping market mean ship operators and their customers need to develop new commercial approaches, the Global Shippers Forum argues in a new report.
The report, “The Implications of Mega-Ships and Alliances for Competition and Total Supply Chain Efficiency: An Economic Perspective”, suggests between six and ten major carriers could end up controlling the world’s main container trades as the pace of consolidation through merger and acquisition accelerates.
This is due to the introduction of mega-ships and the associated development and growth into four – and possibly soon to be three – strategic alliances involving the world’s top 16 operators.
GSF Secretary General Chris Welsh said: “It has been clear for some time that the existing business model isn’t working for either carriers or their customers. There is a widening gulf between customers’ expectations and quality of service as carriers focus almost exclusively on operational arrangements and alliance structures. We urgently need a new ‘commercial contract’ where the needs and incentives between shippers and carriers are better aligned.”
The report questions the received wisdom in the shipping industry that vessel sharing agreements and alliances are good for competition. With important parameters of competition such as capacity, sailing frequency and ports of call removed, many shippers are questioning whether dealing with fewer fully-independent shipping companies could be better than dealing with a larger number of allied shipping companies in alliances.
Welsh said: “Certain shippers believe that a degree of vertical integration between shippers and shipping companies is a potential method to increase the alignment of incentives between shippers and shipping lines. The nature of such integration, and the extent to which it might alleviate the problems felt by shippers, would of course need to be explored. Given the complexity of the issue, and the need for balanced consideration across the container shipping supply chain, there is strong merit in there being an active on-going debate on the implications of mega-ships and alliances which GSF is keen to foster with the container shipping industry and other stakeholders.”