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Impact of P3 & expanded G6
If approved by regulators, the formation of the P3 alliance and the extension of the scope of the G6 alliance to cover the transpacific West Coast and the transatlantic routes, will boost both alliance market shares and carrier service frequencies to unprecedented levels. The capacity shares of the P3 alliance (Maersk, MSC, CMA CGM) in the Asia-North Europe trade would reach 41% - much more than the share of the current biggest alliance, the G6 with about 22%. Similarly, if the G6 alliance carriers (New World Alliance and Grand Alliance) merge all their transatlantic services, they will have a share of about 46% of total transatlantic capacity, more than the current biggest group, MSC with about 16%.
Some shippers are naturally concerned that very large alliances could reduce competition. After all, just two carrier alliances (P3 and G6) could control more than 80% of transatlantic capacity and more than 60% of Asia-North Europe capacity. Competition regulators will be assessing what impact the new alliance formations will have on competition, freight rates and service.
The impact on service frequency will be positive. Assuming that the future G6 network will be the sum of the current New World Alliance and Grand Alliance services, frequencies between major ports will reach record levels. This means five direct weekly sailings from Shanghai to Los Angeles and four direct weekly services from Rotterdam to New York.
To US inland destinations such as Chicago, which can be reached from Asia via Los Angeles/Long Beach or via Pacific Northwest ports and can be reached from Europe via New
York, Norfolk or Montreal, there will be even higher frequencies of sailings.
Drewry has consistently said that the P3 alliance, even if larger than previous alliances, is a positive for both shippers and carriers: it would result in lower underlying costs and better industry stability. It is now becoming clear that both P3 and the extension of G6 could deliver high frequencies of sailings to shippers on all three major East-West routes.
We know that some cargo owners will not want to have all their cargo moving under different carrier contracts but aboard the same alliance ships. But this can be managed to reduce the
risk. Furthermore, our belief is that the alliances will also bring schedule reliability – currently in decline – to the level of the best performers in each alliance.
These mega-alliances are operating alliances, not pricing cartels. Shippers will still be able to ask 20 or more carriers (not two or three alliances) to bid separately in their annual tenders. Yes, the alliances will have an impact on the shipping sector, capacity shares and service frequencies. But in our view it will be a positive impact, just as carrier alliances and code-sharing arrangements having been for the airline sector. Time will tell whether regulators share this view or choose to block these new alliance formations for fear of their dominant market shares.
Source: Drewry Supply Chain Advisors
Some shippers are naturally concerned that very large alliances could reduce competition. After all, just two carrier alliances (P3 and G6) could control more than 80% of transatlantic capacity and more than 60% of Asia-North Europe capacity. Competition regulators will be assessing what impact the new alliance formations will have on competition, freight rates and service.
The impact on service frequency will be positive. Assuming that the future G6 network will be the sum of the current New World Alliance and Grand Alliance services, frequencies between major ports will reach record levels. This means five direct weekly sailings from Shanghai to Los Angeles and four direct weekly services from Rotterdam to New York.
To US inland destinations such as Chicago, which can be reached from Asia via Los Angeles/Long Beach or via Pacific Northwest ports and can be reached from Europe via New
York, Norfolk or Montreal, there will be even higher frequencies of sailings.
Drewry has consistently said that the P3 alliance, even if larger than previous alliances, is a positive for both shippers and carriers: it would result in lower underlying costs and better industry stability. It is now becoming clear that both P3 and the extension of G6 could deliver high frequencies of sailings to shippers on all three major East-West routes.
We know that some cargo owners will not want to have all their cargo moving under different carrier contracts but aboard the same alliance ships. But this can be managed to reduce the
risk. Furthermore, our belief is that the alliances will also bring schedule reliability – currently in decline – to the level of the best performers in each alliance.
These mega-alliances are operating alliances, not pricing cartels. Shippers will still be able to ask 20 or more carriers (not two or three alliances) to bid separately in their annual tenders. Yes, the alliances will have an impact on the shipping sector, capacity shares and service frequencies. But in our view it will be a positive impact, just as carrier alliances and code-sharing arrangements having been for the airline sector. Time will tell whether regulators share this view or choose to block these new alliance formations for fear of their dominant market shares.
Source: Drewry Supply Chain Advisors
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