Analysts warn of potential rate war between new alliances

Analysts warn of potential rate war between new alliances

In the wake of the 2M partners announcing plans for the 22 strings they plan to operate on east-west routes this winter, industry analysts have warned that the schedules from Maersk Line and Mediterranean Shipping Company (MSC), could lead to a fall in freight rates as competing alliances battle it out in key trades.

Alphaliner said that the first of these battleground trades could be Asia-Mediterranean services, where 2M and the competing Ocean 3 alliance of CMA CGM, United Arab Shipping Company (UASC) and China Shipping will jostle for supremacy.

Analysts argue that Maersk and CMA CGM will try to retain their current coverage, which could lead to an 11% increase on the trade, or an extra 14,000 teu per week.

Alphaliner said that capacity will be felt as nine new loops are implemented in place of the seven strings being operated by members of the two alliances. The Adriatic and Black Sea sectors are likely to be hit hardest.

“The increase in trade capacity could tilt the supply-demand balance against the carriers’ favour and threaten the fragile recovery in freight rates that could be observed so far this year,” said the analyst.

It notes that the Asia-Mediterranean trade has enjoyed growth of 7% year to date, while weekly capacity contracted 6%.

“Another price war could thus be triggered on the trade, as the tentative demand recovery on the Far East to Meditteranean routes will not be sufficient to absorb such a large increase in capacity,” said Alphaliner.

The latest vessel sharing agreement between Maersk and MSC was announced on 16 July, just weeks after the proposed P3 Alliance was scuttled by Chinese competition authorities. 2M, still dependant on regulatory approval from various bodies itself, will provide around 185 vessels with a capacity of 2.1 million teu.