Chinese collaboration paves the way for new CKYH

Cosco and China Shipping's new close collaboration looks like the first step toward a significantly stronger CKYH alliance. UASC and Evergreen are already negotiating with the alliance about a potential expansion, according to ShippingWatch's sources.

Photo: APM Terminals

The spectacular collaboration between the two financially struggling container carriers, Cosco and China Shipping Container Lines (CSCL), could become the missing piece that makes the last of the world's three major container alliances fall into place.

According to ShippingWatch's sources the four carriers in the CKYH alliance have been negotiating with CSCL for a long time about strengthening the CKYH collaboration in face of the other two big alliances, P3 and G6, both of which are currently awaiting approval. Especially the CSCL executive team has been under pressure to deliver an agreement that could bring the carrier into an alliance this year. Two carriers have allegedly also been in frequent contact with the alliance, Arabian UASC and Taiwanese Evergreen.

Ten-year agreement

UASC is no stranger to CSCL, as the two carriers already have a ten-year agreement between them. And with an even stronger Chinese player (CSCL and Cosco), CKYH (Cosco, Hanjin, Yang Ming, and K-Line) will become a real alternative to P3 and G6,  both of which stand good chances at being green-lighted within the next few months. Several carriers have been looking to Evergreen for some time now, and if the expanding carrier becomes part of the new, bigger CKYH alliance, the market will certainly be looking at a consolidation around the three big alliances, which account for approx. 90 percent of global container transport: P3, G6, and CKYH.

Several sources that ShippingWatch has spoken to estimate that the close collaboration between the two Chinese carriers represents the first step toward an agreement that will ultimately pull CSCL into the CKYH alliance. This perspective was confirmed by SeaIntel CEO Lars Jensen yesterday. This would also pave the way for similarly expanding carrier UASC, headed by CEO Jørn Hinge (photo), joining the alliance. UASC is currently building a new fleet of ten 18,000 teu container ships in a collaboration with CSCL, ships that the market assumes will be deployed on Asia-Europe in order to make sense financially.

Port of Shanghai

ShippingWatch has also learned that some of the considerations related to a CKYH alliance with six carriers (including the two Chinese) concern the advantages that a strong Chinese tie could bring. First of all, Shanghai's new status as a free-trade zone could potentially become more valuable to carriers with Chinese roots or close to Chinese partners, they say. Second, the carriers have noticed the new state-aid scrapping rules introduced by China, with subsidies to ship owners, with Chinese carriers, that is.

Do you want to stay up to date on the latest developments in International shipping? Subscribe to our newsletter – the first 40 days are free

According to sources in the market, the alliance has been in recent contact and negotiations with Taiwanese Evergreen, though it remains unknown whether the Taiwanese carrier, well-know for relying on its independence, prefers to stay out of the alliances, or whether it prefers a less rigid form of collaboration.

CEO under pressure

There has reportedly been a significant amount of pressure on CSCL CEO Huang Xiaowen to bring the carrier - which suffered a total deficit of USD 268 million in the first nine months of 2013 - into an alliance this year. Huang Xiaowen allegedly considered other options, but with the Cosco deal, the choice of joining CKYH has virtually been made.

The two carriers currently have 4.3 and 3.3 percent of the global capacity, respectively, and according to the newsletter's latest survey the new venture has the potential to become the world's fourth largest carrier, with a total 7.7 percent of the global container capacity, only surpassed by the three partners in the P3 alliance, Maersk Line, MSC, and CMA CGM. Evergreen would then only be the world's fifth largest carrier going forward.

And when the agreement was announced, the two carriers did not hide the fact that the new collaboration has long-term perspectives:

"The agreement will help the two companies achieve advantage complementation (sic) and coordinated growth, and be better prepared for industrial changes, so as to improve the influence of Chinese shipping companies in the world shipping industry," said Cosco in a press release.

Do you want to stay up to date on the latest developments in International shipping? Subscribe to our newsletter – the first 40 days are free

SeaIntel: Chinese collaboration changes nature of alliances

Cosco and CSCL in large-scale collaboration 

More from ShippingWatch

Further reading

Related articles

Latest news

See all jobs