UASC: Shipping Alliances Will Stifle Smaller Operators

John Hinge, President and CEO of United Arab Shipping Co. (UASC) believes shipping alliances will help the box markets on what he called ”a slow journey to recovery,” stabilising the freight rates along the way, the Wall Street Journal reports.

UASC President has projected a bright outlook for major box shippers who have been struggling with depressed freight rates and overcapacity ever since the global financial crisis of 2008.

However, small-scale shipping companies might get muscled out of the business by the shipping alliances such as Ocean Three, comprised of UASC, CMA CGM, and China Shipping Container Lines (CSCL), or the 2M alliance of Maersk Line and Mediterranean Shipping Co. (MSC), which according to Hinge will lead to decreased volatility in freight rates.

“Modern, big ships carry more cargo using less fuel, and this makes it more difficult for [smaller competitors] to be in the trade. 

If you are in a group and cancel one of your five or six departures during low seasons, you will still be OK as the other departures will still have a full cargo and cater to the needs of your customers.

But if you only have two departures and stop one of them, you are dead,” said Hinge.

Hinge concluded by issuing a note of warning, saying that the journey to recovery is not going to go without any hitches.

Recently, UASC signed a global cooperation agreement with Hamburg Süd, based on which the companies will initially cooperate on several of their respective core trades. Hamburg Süd will enter the Asia – North Europe and Asia – U.S. trades in December 2014 and January 2015, respectively, while UASC will enter the Europe – South America East Coast and Asia – South America East Coast trades effective from mid-2015.

Initially, the cooperation will be in the form of slot exchanges; vessel deployment opportunities will be explored in due course. Further geographic scope for cooperation is currently under discussion. Both carriers also intend to explore other areas of cooperation going forward.