Dec 4, 2013

G6 Alliance to boost partnerships in N. America West Coast/Atlantic trade

The G6 Alliance, comprising APL Ltd., Hapag-Lloyd, Hyundai Merchant Marine (HMM), Mitsui OSK Lines (MOL), Nippon Yusen Kaisha (NYK) and Orient Overseas Container Line (OOCL) will kick off partnerships in the North America West Coast and Atlantic trade routes starting the second quarter of 2014. The Group has already fostered partnerships in North Europe, the Mediterranean region and the North America East Coast lane, so the new move will give them team-ups in all major routes in the East-West trades. With this, the total number of ships deployed by the G6 members in all trade routes will reach 240 units and by expanding the scope of their partnerships, they aim to rationalize their services by building the optimum distribution of their flexible fleets, as well as boost cost competitiveness through ship enlargement. Meanwhile, services that directly call to Japan will be exempted from partnerships as the Group intends to keep the current system even beyond the second quarter of 2014.

The G6 debuted first in the Asia-Europe/Mediterranean route in March 2012 through the team-up of the Grand Alliance (GA) and The New World Alliance (TNWA). It then expanded the scope of its partnership to include the Asia-North America East Coast trade at the turn of 2013.

However, the G6 realized that it would be more effective to further expand its partnership scope in order to map out better service quality and cost competitiveness amid the lingering slump in the market. They had always intended to boost the scope of partnerships of the alliance, but the change in the environment brought about by the debut of the P3 Network by Maersk Line, the Mediterranean Shipping Co. (MSC) and CMA-CGM, next year drove the G6 to foster partnerships in the remaining North America West Coast/Atlantic trade routes. As a result, the operational scale of the six member companies will balloon to 240 ships, virtually on par with the planned 255-ship strong fleet of the P3.

The current service system of the G6 in the North America West Coast is as shown in the accompanying table. The GA and TNWA operate three service loops each in the Atlantic trade route. While the details of the new system have yet to be finalized, the six member carriers of the G6 will continue to operate the same number of ships in the North America West Coast trade since the G6 debuted at 76 ships in 12 services, covering 27 ports in Asia and North America West Coast. In particular, the Group will beef up port calls on the Asian side. However, this will not include the PAX service that is operated by Hapag-Lloyd at present, as the latter will keep independently running this service even after it partners up with G6. Further, the G6 operates 42 ships in five services in the Atlantic trade, covering 25 ports in North America East Coast and Europe.

With regard to the North America West Coast route, while it is different from the Europe and North America East Coast trade routes in which the G6 has partnerships, its transport distance is relatively shorter. The Group has thus far managed to slash costs by expanding their implementation of slow-speed navigation with the addition of ships and by deploying above-10,000-TEU large-size ships. However, shippers in the North America West Coast have strict standards in terms of transit time (T/T) and it is quite difficult to deploy jumbo ships, save for a few exceptions, owing to the limitations in the infrastructure at the ports in the West Coast. In light of this, the new service system of the G6 will likely transform the service more into shuttle services by modifying such factors as the duplicate ports of call in each service loop.

Further, the G6 member companies have self-operated terminals on the West Coast, thereby making it difficult for them to adjust the interests of each operator when merging services. In this regard, they intend to take each operator into consideration and distribute the ports of call without causing any disadvantage to specific terminals in order to ensure that the balance in the ports of call does not collapse.

No changes will be enforced in the services that call at Japanese ports for now. GA operates the JPX service in the Japan-North America West Coast trade route in partnership with Hanjin Shipping, while MOL runs the JAS service jointly with Kawasaki Kisen Kaisha (K Line). These services will keep their hitherto system in/after the second quarter of 2014.

Now with G6 partnering in the East-West trunk routes, the existing alliance framework of GA and TNWA will essentially cease for the time being, except in some services that stop at Japanese ports. However, this does not necessarily mean that the GA-TNWA partnership has been dissolved, as it seems that this matter will have to be decided upon based on the mid- and long-term trends in the structure of the alliance.

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