Freight Forwarding and the Impact of Alliances

Since 2015, the freight forwarding industry has found itself maneuvering operations that are impacted by shipping Alliances. There are three—2M, Ocean, THE Alliance—that control over 80% of global trade.

Carriers operate in three teams controlling container space and volumes through vessel sharing agreements within their alliance.

This graphic shows the control of ships, TEU and market. But a shift is coming. Let’s take a look at why Alliances formed, how the freight forwarding industry is shifting and what shippers can do in the midst of change.

How did Alliances form?

Historically speaking, before Alliances, the industry operated with a large number of independent carriers driving competition. Then years of weak volumes, poor capacity management and financial losses shook up the system. Who remembers 2017 when leading carrier Hanjin went out of business, abruptly?

This event, among others, shifted the container company’s mindsets creating the Alliances system. Working in teams created less options for shippers—demand without supply drives price. Operating within their networks the carriers adjusted capacity quickly, keeping space tight and rates steady. They could pull (blank) vessels out of service within the Alliance to match capacity with container demand.

We all remember the COVID story. With nowhere to travel starting in 2020, demand from consumers for goods was off the charts. Shipping fees skyrocketed. For example, spot rate shipping from Shanghai to New York in 2021 cost nearly $16,000. That rate in March 2023 fell under $2,500.

Economics drive change among Alliances

From 2020 to 2022, our team along with others strongly recommended that importers diversify their international supply chain among the three Alliances as much as possible. This served a purpose to balance both service and pricing risks.

As congestion eased and the world reopened, the demand for goods has fallen to normal levels, as noted above. And freight forwarding rates have fallen. According to Statista, monthly freight forwarding rates peaked in September 2021 at reaching a record price of nearly $10,400. In May that figure was just shy of $1,500. Then, a surprise announcement came earlier this year. The 2M Alliance between Maersk and MSC is breaking up once the partnership expires in 2025. The vessel-sharing agreement, which began in 2015, helped to prompt the wave of consolidation in the industry.

Over the last few months, there’s been a hovering question, “What happens now?” When the announcement was released, Maersk and MSC said they would pursue their own strategies. These new strategies put them on diverging paths which evidently caused the desire to break up the alliance.

Some say Maersk and MSC will find new Alliances among other carriers. During the spring TPM23 conference, industry pundits said carriers are now facing a market similar to the one seen during 2008-09, a with weak demand. Their prediction is that 2M is just the first Alliance to break up.

Advice for importers

Ironically with this industry shift and falling rates carriers have new container ships about to hit the water. Freight Waves calls it a tidal wave of new contain ships.

  • 1.1 million TEUs in both 2021 and 2022
  • 2.34 million TEUs in 2023
  • 2.83 million TEUs in 2024

Between an unsteady Alliance future and increased TEU availability, carriers won’t be as reliant on their Alliances system to ensure they fill their own vessels. We anticipate vessel sharing agreements will shift and change. Rates will stay depressed because capacity is high and demand low, simple economics. As a result:

  • Stay flexible
  • Pay attention to the news
  • Pay attention to disruptions
  • Be able to move quickly from port to port
  • Be able to move quickly from carrier to carrier depending on their alliance backing