There was a saying..’Who dares what’.. which line dares to drop tonnage? In reality? Not talk only..

Rates stability ‘more likely’ in new market structure
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Mike King | Tuesday, 31 January 2017
Consolidation and new alliances among container lines should limit the chance of a price war in 2017
Recent consolidation among container lines and the changing web of container shipping alliances from April could limit the chance of a price war breaking out between lines in 2017 but are no guarantee of pricing stability, according to one leading analyst.
The ongoing shake-up of the four main current alliances in operation – the 2M Alliance, the G6 Alliance, the CHYHE Alliance and Ocean 3 – after a tumultuous 2016 of mergers and acquisitions is expected to see the emergence of just three alliances by around April.
Subject to regulatory approval, they are expected to comprise of the following lines: The 2M Alliance: Maersk Line (with Hamburg Süd), and MSC; The Ocean Alliance: CMA CGM (with APL), China COSCO Shipping (merged company from COSCO and CSCL), Orient Overseas Container Line, and
Evergreen Line; and THE Alliance: Hapag Lloyd (with UASC), MOL, NYK, K Line and Yang Ming.
Speaking in an ocean freight rates webinar late last month, Patrik Berglund, CEO & Co-founder of Xeneta, a containerised ocean freight benchmarking and market intelligence specialist, said this could theoretically reduce the chances of a price war.
“Traditionally we’ve seen price wars as soon as the market picks up a little bit,” he said. “So the market has had a GRI (Generate Rate Increase) and then someone has stuck out their neck and reduced prices in order to try and win market shares because there’s so much overcapacity.” While the new alliance system was no guarantee this destructive cycle would not be repeated, the concentration of capacity “might” help lines avoid past mistakes.
He also said shippers were seeking clarification from lines about how scheduling changes due to the new alliance structures would affect services. “Many BCOs are concerned or confused about who they are contracting with in these alliances, how service will be affected, which carrier will really be shipping their cargo etc,” he said.
Asked if shippers would be better agreeing long or short-term contracts with shipping lines in 2017, Berglund said it depended on the supply chain flexibility of the beneficial cargo owner (BCO).
“If I were a BCO and I had the flexibility to shift some of my volume into the short-term market, I’d definitely consider that option and do maybe 70% on a long-term contract and 30% on a short term one,” he said. “But operationally, strategically and tactically they are very different markets and require different amounts of attention and resources.”
“What we’ve seen a lot of our customers do is go from fixed annual contracts into shorter timespans to capture the right exposure. So some have gone from annual fixed fees to quarterly fluctuating prices.”
He also advised shippers that had not already finalized Asia-Europe long-term freight contracts that, at this late stage in the negotiating cycle, they would be better waiting until later in Q1.
“If I hadn’t already signed in Q4, I might be very tempted to wait until the end of Q1 so I can see what happens post-Chinese NY with short term rates,” he said. “I think it’s a big risk that shippers this year keep on postponing this decision, but now it’s already done, and it’s done with such a huge volume of contracts, I’d be keen on waiting it out, maybe until the end of Q1.
“But I’ve got to stress that there’s always a risk because if rates increase, shippers will be worse off. But traditionally rates have plummeted after Chinese New Year over the last few years and 2017 might very well be the same because we know there’s overcapacity.”

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