Following years of raking up substantial losses ocean carriers in major trade lanes such as Asia to Europe and Asia to the U.S. realized that ruinously low freight revenues could be stemmed only by applying “economics of scale” principles i.e. by building mega container ships that would be operated more efficiently. Of course, once decisions by individual carriers were made to build and operate very large containerships, none of the other competing carriers “worth their salt” wanted to be left behind and joined the ranks of very large containership operators as quickly as possible. With new, bigger container ships they could defended their customer base at whatever the cost while justifying rate reductions with coast savings they derived from “economics of scale” vessel operations.
Carriers eventually realized that attempts of increasing revenues by operating cost-efficient, mega container ships failed, Therefore they took the next logical step of tackling the other major culprit, overcapacity, by forming vessel sharing agreements and ocean carrier alliances. Each member of such an alliance shares a predetermined amount of container slotswith the other members. This means that participating members are able to rationalize their services, and can offer more frequent services and extended geographic coverage to their customers without having to make large investments in ships and terminals.
Today, three ocean carrier alliances dominate the trade lanes from ASIA to the U.S.
- 2 M Alliance is comprised of
- Maersk Line
- Med. Shipping Company (MSC)
- The Alliance, comprised of
- Ocean Network Express (K-Line, MOL NYK)
- (Hyundai is expected to join The Alliance in April of 2020 because the conditions of their 2M Alliance membership supposedly would not allow them to add a series of mega carriers to their fleet)
- Ocean Alliance, comprised of
- COSCO Shipping
- Wan Hai Line
It is important to note, that alliance members may not co-operate in setting common rates or setting common terms in service contracts, or in negotiating service contract rates or terms as a group.