HMM’s change of allegiance from Maersk-led 2M to join THE Alliance in 2020 has shaken up the container sector
THE Alliance, with 11% market share in terms of TEU, is currently ranked third among the top alliances, after 2M and Ocean Alliance which have 20.8% and 19.3% respectively.
VesselsValue analyst Zheng Yang Cheng said “Even though HMM only controls 0.7% of the container market today, things will be markedly different with the delivery of 12 x 23,000-TEU ULCSs in 2020 and 8 x 15,300-TEU ULCSs in 2021. This will propel the market share of THE Alliance from 11% to 14.5%, much closer to its rivals 2M and Ocean Alliance who will have 17.3% and 19.8% respectively in 2022.
“Having these large ULCSs also allows THE Alliance to seek out further opportunities in the Far East-North Europe trade whenever additional demand is required. This allows the other members of THE Alliance (Hapag-Lloyd, Ocean Network Express and Yang Ming Marine Transport) to focus on running their operations without worrying about having to place additional newbuild orders.
But Mr Cheng warns “However, having additional capacity comes with associated risk. Amid the trade war between US and China, shippers are pessimistic with demand growth going forward. Filling the ULCSs would pose a challenge while the trade war continues.”
He points out that newbuild orders have already decreased 54% year-on-year, from 545,000 TEU in H1 2018 to 252,000 TEU in H1 2019.
With IMO 2020 kicking in, many shippers are also sending their vessels to yards for scrubber installation instead of for demolition, further providing downward pressure to freight rates for containers moving forward.
Mr Cheng summed up “Nonetheless, with geopolitical and economic situations that can change in the blink of an eye, both fortunes and debt can be very quickly created. HMM and THE Alliance can only hope that their strategies will pay off.”