The container shipping market has now stabilised after a period of consolidation. However, Chinese ambitions, against the backdrop of the Belt and Road Initiative, could mount even further.
If we take into account the TOP 100 BRS Alphaliner, we have the situation on July 26th, 2019 where the three major maritime alliances are ranked follows:
- 2M Alliance: 7.6 million TEUs, or 33.1% of overall capacity offered
- Ocean Alliance: 6.9 million TEU, or 30% of global capacity offered
- THE Alliance: 4.3 million TEUs, 18.7% of overall capacity offered
The three alliances combined therefore offer a total capacity of 18.3 million TEUs, which represents 81.8% of overall capacity offered.
Stabilisation of the forces involved
Today we are witnessing a relative stabilisation of the forces involved, after a period of strong consolidation in recent years. The reinforcement is discernible, and the recent integration of HMM into THE Alliance is a logical move which will ensure that it avoids being too marginalised compared to the top-two mega alliances.
When we take a look at the order books we can see that 2M and Ocean Alliance are involved in a competition to become the sector giant. As for THE Alliance, it will be able to take advantage of the relatively large increase in HMM’s fleet in order to try and keep up with the others (at least for the time being).
This configuration blocks the market. In practical terms, this means there is no room for the emergence of a new alternative alliance that would hold a sufficiently large enough share of the market to be able to survive commercially.
The rise in power of Cosco
If the exemptions granted to maritime consortia in the European Union, which are currently under evaluation, are not renewed in April 2020, the question boils down to knowing whether China alone has the means (taking into consideration the question of Taiwan) to quickly propose a shipping giant that would be able to capture at least 30% of the total supply by 2022.
This giant would be clearly controlled by the Chinese state economy and be totally at its service. It should be large enough to support a structurally expansionary economic policy, mainly on the Intra-Asia, Asia-Europe, Asia-US and Asia-Africa routes.
The "Great Helmsman" of this Chinese giant could only be Cosco, a state-owned company that emerged in the 80s for the sole purpose of being the armed wing of the planned economic development of the concept "China, The World’s Factory", such as we have experienced it since the early 2000s.
The recent, rapid, discreet and successive absorptions of CSCL and then OOCL is quite symptomatic of Cosco's long-term appetite for consolidation.
There is no real reason for this appetite to diminish, even less so today now that the various "Belt and Road Initiative" scenarios (both on land and on sea) have been abundantly communicated and explained along with their long-term visions.
An acknowledged expansion strategy
We can do nothing more than recognise that this strategy of hegemonic commercial expansion, by flooding consumer markets, is no longer hidden but fully acknowledged at an international level by the Chinese government.
CMA CGM, already a member of the Alliance with Cosco and heavily dependent on its Chinese activities, could be at the heart of the game.
If the "Consortia Blocks Exemptions" are extended for ten years, the current status quo could continue to exist for a few more years yet. If the "Consortia Blocks Exemptions" are not renewed and the alliances go into de facto dissolution, CMA CGM would become a prey that is almost already semi-integrated into the system
In conclusion, with or without a de facto integration of CMA CGM, an enlarged China, including Taiwan, is almost already guaranteed the pole position in the shipping industry before 2029
The big battle ahead is that of the sales Incoterms for commercial contracts, Chinese manufacturers are increasingly in a position of strength that would allow them to switch from contracts FOB Chinese ports to CIF contracts... Once again, the maritime battle will be won on land, hence the growing interest of major shipping companies for integrated offers including 3-4 PL type services.
See you next week for scenario 2 of the summer saga: "Rise of economic nationalism, the states take back control".