FMC Approves Ocean Alliance for Shipping Collaboration

The Federal Maritime Commission (FMC) has approved the formation of the Ocean Alliance, a shipping collaboration between four major container lines, effective October 24, 2016. The members of this alliance include COSCO, CMA CGM, Evergreen, and OOCL, who are now permitted to share vessels and charter space across U.S. and international trade lanes.

Details of the Ocean Alliance

The Ocean Alliance aims to maintain a competitive environment within the shipping industry, which has been experiencing significant consolidation. The alliance brings together four leading container lines, collectively managing a fleet of nearly 400 vessels. This collaboration covers numerous trade routes and is tasked with maintaining competitive shipping practices while leveraging shared resources for efficiency.

As of September, the alliance accounted for 19.8% of U.S. inbound seaborne volumes, a rise from the 18.2% share when the alliance was initially announced. In comparison, the 2M Alliance holds 15.4% of the U.S. volumes, and THE Alliance, excluding Hanjin, has a 13.8% share. This shift reflects the ongoing consolidation trends in the industry.

Context and Industry Trends

The shipping industry has been characterized by fragmentation below the top five carriers, prompting moves towards consolidation and collaboration. For instance, the merger of Cosco and China Shipping has been completed, and CMA CGM is in the process of acquiring Neptune Orient Lines. Such mergers and alliances are expected to continue as the industry seeks greater stability and efficiency.

The Ocean Alliance is set to take effect in April 2017, marking a significant step in this consolidative trend. The approval from the FMC suggests a strategic move towards optimizing resource utilization across the vast network of trade routes that the member lines operate within.

Future Developments: Premier Alliance Agreement

In a related development, the FMC has also given the green light to the Premier Alliance Agreement, which is scheduled to become effective on February 9, 2025. This agreement will replace THE Alliance and does not include Hapag-Lloyd as a member. Instead, it involves Hyundai Merchant Marine, ONE, and Yang Ming, who will share vessels on U.S.-Asia trade lines.

This new agreement covers major East-West tradelines and aims to enhance cooperation among its members. The filing for this agreement was made on October 28, 2024, but was delayed on November 5 for further information before receiving final approval. This indicates a continued interest in strategic alliances to bolster service offerings and competitive positioning in the global shipping market.

Implications for the Shipping Industry

The approval of the Ocean Alliance and the Premier Alliance Agreement marks a significant phase in the evolution of the global shipping industry. As these alliances become operational, they are expected to influence trade dynamics, pricing structures, and operational efficiencies in the shipping sector.

With the Ocean Alliance's extensive coverage of trade routes and the Premier Alliance's focus on major East-West tradelines, these collaborations signify a shift towards more integrated and cooperative business models. Stakeholders in the shipping industry will closely monitor these developments as they unfold, given their potential to reshape competitive strategies and market shares in the coming years.

The approval of these alliances underscores the FMC's role in fostering competitive and efficient maritime commerce, reflecting broader trends of consolidation and strategic cooperation within the global shipping industry.