Future of Maersk and MSC’s Alliance May Be Doubtful as EC Reviews Exemptions — Panjiva
Más

Panjiva_research_logo

Future of Maersk and MSC’s Alliance May Be Doubtful as EC Reviews Exemptions

Corp - Shipping 608 European Union 406 Mode - Containerized 1005 Mode - Seaborne 1273 Theme - Alliances 86 U.S. 3301

The European Commission has kicked of the process of investigating whether the block exemption from competition law applied to container-line alliances should be continued. It is due to end in April 2020 with initial consultations due to end in December. The allowance is based on the consortia having a market share of under 30%. The review may challenge both that figure as well as the scope of its application.

On a global basis in terms of capacity on the water both 2M (Maersk and MSC) and Ocean (CMA-CGM, COSCO Shipping and Evergreen) are close to falling afoul of the 30% rule. The 2M Alliance had 7.29 million TEUs of capacity vs. 21.8 million TEUs for the top 100 container-lines, Panjiva analysis of Alphaliner data shows.

Ocean reached 6.66 million TEUs while THE Alliance reached 3.76 million TEUs. The remaining top 100 liners had an 18.8% share between them and so are unlikely to provide much of a competitive alternative at a global level.

OCEAN OF THE GIANTS

Chart segments global container vessel capacity by container-line. Calculations drawn from Alphaliner data retrieved on September 28 2018.   Source: Panjiva

The review may also look at a wide range of trade lanes to determine whether the consortia are dominating particular routes. Assuming the EC confines its study to European outbound routes the three alliances currently have a combined 87.8% of EU-U.S. routes in the past 12 months, Panjiva data shows. That’s principally due to 2M’s 44.7% share while THE Alliance had a 26.2% share and Ocean a more modest 16.7%.

One new challenge for the continuation of the exemption is the decision of THE Alliance and Ocean Alliance to jointly operate routes from the western Mediterranean to four U.S. ports, as outlined in Panjiva research of September 27. The two combined had a 49.9% market share on those specific lanes while 2M had 41.5%.

One mitigating factor will be a determination as to whether shippers and forwarders can use local alternatives (e.g. Charleston instead of Savannah) as well as service options.

2M MAY HAVE TOO MUCH FOR REVISED ALLIANCE RULES

Chart segments U.S. seaborne imports by port of lading country and steamship SCAC for the past 12 months, denominated in TEUs.   Source: Panjiva

The consolidation in market power through the formation of alliances and mergers between hasn’t necessarily helped the container-lines exercise oligopolistic power on container rates. That can be seen in the spread between container rates and fuel costs which have soared in the third quarter of 2018 vs. a year earlier, Panjiva analysis of S&P Global Platts and SSE data shows.

The liners had already seen two consecutive quarters of declining profitability which may make for compelling evidence that competition is not being adversely affected by alliance operations.

NOT TYPICAL OLIGOPOLISTIC BEHAVIOR

Chart compares bunker fuel costs (global average) to container-rates (all China-outbound routes). Calculations include Shanghai Shipping Exchange and S&P Global Platts data.   Source: Panjiva

PANJIVA RESEARCH is a service provided by Panjiva, Inc. ("Panjiva") to relevant global subscribers, and are deemed to be Panjiva "Services" subject to the Panjiva Terms & Conditions of Use. Information contained within or made available via the Services is for informational purposes only and nothing in the Services shall constitute or be construed as an offering of financial instruments, or as investment advice or recommendations by Panjiva, Inc. or its affiliates of an investment strategy or whether to "buy", "sell" or "hold" an investment. The Services may include views and commentary about customers of Panjiva. No aspect of the Services is based on consideration of your individual circumstances, and you should determine on your own whether you agree with the information contained within or made available via the Services. Employees involved in Panjiva Research may hold positions in securities analyzed or discussed in the Services. Panjiva does not make any express or implied warranties, representations, endorsements or conditions with respect to the Services and the information contained within or made available via the Services, including without limitation, warranties as to the usefulness, completeness, accuracy, currentness, reliability or sufficiency of any information (including, without limitation, conclusions, statements, opinions, estimates, forecasts or projections of any kind) and expressly disclaims any implied warranties. Neither this disclaimer nor any of its contents may be forwarded or redistributed without the prior written consent of Panjiva. © 2019 Panjiva, Inc. All Rights Reserved.