U.S. Maritime Watchdog Approves Shipping Alliance
October 21 2016 - 06:53PM
Dow Jones News
By Erica E. Phillips
U.S. regulators on Friday approved a new alliance between four
of the world's largest container operators.
The U.S. Federal Maritime Commission voted to allow the Ocean
Alliance, an agreement among France's CMA CGM, China's Cosco Group,
Hong Kong's Orient Overseas Container Line and Taipei-based
Evergreen Marine, to become effective as of Monday.
The FMC, which governs the U.S. international ocean
transportation system, delayed its initial approval citing concerns
about fair pricing for shippers moving cargo in and out of the U.S.
The FMC announcement Friday said the decision "follows an
exhaustive review process" that "thoroughly examined all aspects of
the proposed agreement to assure that competition in the ocean
transportation industry would not suffer."
Commissioner William Doyle of the FMC said in a statement Friday
that he approved the alliance after significant changes were made
to the original agreement. The agreement now ensures that "parties
are limited in their ability to use their collective market power
to jointly negotiate contracts" with third parties, Mr. Doyle
said.
He added that the language in the Ocean Alliance agreement is
now similar to what exists in the alliance agreement known as 2M,
between Maersk Line -- the A.P. Moller-Maersk shipping unit that is
the world's biggest container line by capacity -- and No. 2 global
operator Mediterranean Shipping Co.
The parties to the Ocean agreement will be permitted to share
their ships, charter space on each other's vessels and enter
arrangements on major international trade lanes. The alliance is
slated to become operational in April 2017.
Shipping alliances have taken on increased importance in a
global-shipping industry buffeted by overcapacity and slowing
volumes. While freight rates have fallen sharply in recent years,
the industry remains highly fragmented. Alliance partners share
ships, networks and port calls, which can cut their costs by
hundreds of millions of dollars annually.
The new Ocean Alliance will challenge the dominance of the 2M,
which has a 16% market share in the Asia to North America route and
a 34% share for Asia to Europe. A third grouping called THE
Alliance, made up of German, Japanese and Korean operators, is
awaiting regulatory approvals and will have a 39% market share for
Asia to North America and 30% for Asia to Europe.
Some shipping customers have raised concerns about the spread of
vessel-sharing agreements in recent years, saying they make
handling shipments at ports far more complicated and costly.
Container operators say by next year, the alliances will offer
better service compared with individual operators. Their shared
resources will give cargo owners more sailings at the best price,
they have argued.
--Costas Paris contributed to this article.
Write to Erica E. Phillips at erica.phillips@wsj.com
(END) Dow Jones Newswires
October 21, 2016 18:38 ET (22:38 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.