A fragile truce: Container lines make peace after a bloody price war. Can it last?
IT WAS clear a couple of years ago that the world’s big container-shipping lines were sailing into a storm too big to steer around. Back in the mid-2000s, when world trade was booming, they had ordered fleets of huge new boxships, only to take delivery of them during a downturn. This led to overcapacity, and an all-out price war in 2011, as container lines sought to fill their new ships and defend their market share.
To make things worse, oil prices were soaring despite the weak world economy, adding greatly to the shippers’ running costs. Having made combined profits of around $7 billion in 2010, the container lines slumped to losses of about $5 billion in 2011. So, faced with the prospect of sinking further under water this year, the shipping lines began idling or scrapping older vessels. They also ordered their captains to begin “slow steaming”: cutting their speeds to save fuel.
Then, in December, several new alliances were announced. Rival lines agreed to share space on board their vessels, allowing them to idle more of their surplus ships. Two of the biggest lines, MSC of Switzerland and France’s CMA CGM, bunked up together. Two earlier tie-ups, each involving three lines, were spliced into a new group, G6, bringing together firms from Japan, South Korea, Hong Kong, Singapore and Germany. And Taiwan’s Evergreen line said it would co-operate more closely with CKYH, an East Asian alliance that includes China’s state giant, COSCO.