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UPDATE 1-Container group CMA CGM unveils "Ocean Three" alliance in quest for efficiencies

Tue Sep 9, 2014 7:05am EDT

(Rewrites first paragraph, adds detail, quotes)

By Gus Trompiz and Jonathan Saul

(Reuters) - French container shipping group CMA CGM has sealed an alliance with two rivals after a failed attempt to partner with bigger peers Maersk and Switzerland's MSC, vetoed by China earlier this year due to competition concerns.

CMA CGM said on Tuesday it had agreed a service-sharing alliance with China Shipping Container Lines Co Ltd and United Arab Shipping Co to be known as Ocean Three. The agreement still needs approval from the U.S. Federal Maritime Commission.

The deal comes after the collapse in June of CMA CGM's planned service-sharing alliance with Maersk and Mediterranean Shipping Co or MSC, since when the latter two operators have formed a two-way linkup that they expect to launch early next year.

The shipping industry has been battling overcapacity linked to a glut of new vessels ordered during a boom period before the global financial crisis of 2007-2009, forcing operators to look for ways of improving efficiency.

"While the CMA GGM/UASC/CSCL setup is not necessarily a love relationship, that does not mean that the new alliance won't work well,"
Jan Tiedemann, a shipping analyst with consultancy Alphaliner, said.

"The three carriers could work together well, provided they find a way to manage and streamline day-to-day vessel and terminal operations,"
Tiedemann said.

The alliance will cover Asia-Europe, Asia-Mediterranean, Transpacific and Asia-United States East Coast trade routes, and will combine vessel-sharing, slot-exchange and slot-charter agreements, CMA CGM, the world's third-largest container shipping firm by containers carried and fleet size, said in a statement.

With freight rates still struggling to rebound, companies are betting on vessel-sharing arrangements to help them reduce operating costs.

"For the big carriers ... it is almost not an option not to be in alliance ... as there is market consolidation going on,"
Tiedemann added.

In another sign of a push to greater scale in the sector, Hapag-Lloyd and Compania SudAmericana de Vapores have agreed to form the world's fourth-largest container shipping group, a deal that sources said last week should win conditional approval from the European Union.

 (Editing by Andrew Callus and David Holmes)

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Alphonso (mango)
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