[110914.EN.SEA] Update 2-CMA CGM Unveils 3-way Shipping Alliance In Efficiency Drive

By Gus Trompiz and Jonathan Saul

PARIS/LONDON, Sept 9 (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 route-sharing alliance with China Shipping Container Lines Co Ltd (CSCL) and United Arab Shipping Co (UASC) to be known as Ocean Three in a bid to save costs on key container routes.

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 becoming more efficient.

CMA CGM said the new alliance would cover routes between Asia and Europe, as well as Asia and North America.

It had planned a service-sharing alliance with Maersk Line and Mediterranean Shipping Co (MSC), but that collapsed in June following opposition from China's anti-trust authorities.

CMA CGM's new three-way deal would not need regulatory approval from China or the European Union as the partners would have less than 30 percent market share on Asia-Europe and Asia-Pacific routes, Vice Chairman Rodolphe Saade told Reuters.

However, it would need approval from the U.S. Federal Maritime Commission.

"It is going to be possible to implement the agreement very swiftly, with a launch planned for week 49, or early December," Saade said by telephone.

The alliance would have 20 percent market share for Asia-Europe trade and about 14 percent on Asia-Pacific routes, he said.

It will be competing against a two-way partnership that Maersk and MSC plan to launch early next year following the failure of the project with CMA CGM.

Maersk said in July its partnership with MSC would have a market share below 30 percent in routes between Asia and Europe.

FILLING BIG SHIPS

Like other alliances, the Ocean Three tie-up will aim to better fill larger ships and offer customers more frequent services to a wider range of port destinations.

"While the CMA CGM/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 bring together 132 ships to serve 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 said.

The French firm, which is owned by founder Jacques Saade and his family, is the world's third-largest container shipping firm by containers carried and fleet size, behind Maersk and MSC.

CMA CGM expects to generate significant savings from the alliance and above those it projected from the deal with Maersk and MSC, Rodolphe Saade said, declining to give any numbers.

Ocean Three would notably deploy large ships on the busy Asia-Europe route, while also giving priority to the partners' own port terminals, boosting traffic for CMA CGM's Terminal Link subsidiary, he added.

With freight rates still struggling to rebound, companies are betting on vessel-sharing to help 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.

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.

The creation of Ocean Three means all major Asia-Europe shipping firms are now part of vessel-sharing deals, potentially encouraging similar moves in other parts of the world, CMA CGM's Saade said.

"I think this phenomenon (of alliances) is going to grow. People talk a lot about east-west but we also have partnerships on north-south routes even if it's not yet on the same scale," Saade added. (Editing by Andrew Callus, David Holmes and Mark Potter).

Source : Reuters, 11.09.14.