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Complexities of the Market

Another good example of the complexities of the current market.

There has been increasing criticism that carrier consolidation has led to some sort of de-facto collusion due to the dominant position of the alliances.

Here is a very good example from the Transpacific of the exact opposite. Data from Sea-Intelligence shows that the number of non-alliance services in the Pacific trade to the USWC has more than doubled now compared to before the pandemic. Non-alliance services in this trade now account for more capacity than either the 2M or THE alliances.

Hence it is clear that given the appropriate market conditions it is certainly feasible to see added competition to the alliance structures.

But whereas the injection of added capacity into a trade where demand is booming appears to be the right thing to do, it has some clear negative side-effects.  

The injection of large amounts of vessel capacity into the Pacific trade is a factor in the rapidly escalating congestion problems on the US West Coast. Cranking up vessel capacity does not automatically create added capacity related to ports, trucks, chassis, rail, warehouses etc.

Hypothetically, the carriers could have refrained from injecting this much new capacity into the Pacific. Then we could have avoided the increasing congestion we now see - but of course then carriers would be critizised for keeping capacity artifically low which in turn would create an even larger upwards price pressure.

Also, the added capacity in the Pacific comes with the “price” that capacity is pulled out of other trades around the world causing shippers elsewhere to experience blank sailings and escalating freight rates.

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