Shipping lines reduce service loops ahead of tariffs
- The recent slot sharing agreement between ZIM and 2M alliance members is a "preemptive and defensive" move, designed to cut service loops and maintain market share as tariffs between the U.S. and China begin to affect volumes, according to a research note by Panjiva.
- Marketed as a way to reduce transit time, the deal in fact removes two service loops from the Asia - U.S. East Coast (USEC) route. ZIM will operate one (down from two) while Maersk Line and MSC will run a total of four (down from five) services on the route as of September.
- However, it's not all cuts, Pajniva wrote. The service will also deploy a 6,500 TEU vessel on a new "Elephant" service, which calls on eight ports as it travels between Thailand and the U.S. East Coast, according to a customer advisory from MSC.
When asked to confirm the correlation between tariffs and its deal with 2M, ZIM said the two were unrelated.
"The agreement was negotiated beforehand," Shats Avner, public relations manager at ZIM told Supply Chain Dive via email. "Like all players, we are watching the recent changes closely and try to estimate the impact of the new tariffs, however the strategic agreement with 2M is not due to these developments."
By eliminating services, the container lines benefit from less competitive pressure in the wake of uncertainty, Christopher Rogers, a research analyst at Panjiva, told Supply Chain Dive via email.
"Not only does (2M) reduce capacity on the lanes more broadly it will also reduce ZIM's incentive to compete with 2M on pricing," Rogers wrote. "That's particularly important given how quickly ZIM has been building its market share on Asia-USEC routes."
He maintained the big issue of this peak shipping season would be the "uncertainty around American tariffs on Chinese exports," however, and the strengthening of market share plays into that. "It's also worth noting all three big alliances have withdrawn Asia-USWC services — I'd expect the same to happen for Asia-USEC too."
The full weight of tariffs have yet to come into effect, but already the trade war between the U.S. and China is shifting trade flows by way of ocean freight routes.
2M cut its TP-1/Eagle service route from Asia to the U.S. West Coast (USWC) on June 29. Its competitors did not take long to follow suit. THE Alliance said it would cut its PS8 service on July 31, while the Ocean Alliance will stop its PSW4 string at the end of August, The Loadstar reports.
With the service updates, the three alliances, which represent nine of the world's largest ocean carriers, will have altogether reduced 31,300 TEU a week of capacity, Alphaliner said in last week's newsletter
U.S. ports have yet to see such a downturn, however, and instead continued to report record volumes over the summer. Reports suggest this may be a consequence of a rush to import products ahead of tariffs, making peak season come early, rather than a result of continued high volumes.
- Supply Chain Dive ZIM will join 2M Alliance on Asia-US East Coast trade
- The Loadstar Trade war sparks more capacity cuts on transpacific container trades
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