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2M Alliance Could Mean Higher Costs and Impact Chassis Availability for Intermodal Freight Transporters at New York/New Jersey Port

Posted on Thursday April 9, 2015 by April U

What has 185 vessels, an estimated capacity of 2.1 million TEUs and is likely to cause more headaches for truckers and intermodal freight haulers? Answer: The 2M Alliance between Maersk Line and Mediterranean Shipping Company (MSC). While this alliance between the world’s two largest container shipping companies is no riddle, it is certain to have repercussions throughout the industry.

According to a recent JOC article, Jeff Bader, president of the Association of Bi-State Motor Carriers spoke about some of the challenges that he sees as being caused by the 2M alliance for freight transporters at the Port Authority of New York/New Jersey (PANYNJ). The article echoes Bader’s concerns as expressed in a February 16, 2015 letter to Bi-State Motor Carrier members. Some of the expected and known challenges for container freight haulers on land include:

  • The potential for higher costs to freight transporters as a result of empty containers being routed from one terminal to another.
  • An additional strain to already inadequate chassis availability from the expected increase in chassis demand at the ports in the 2M Alliance.
  • Increased chassis migration and utilization at affected port locations.
  • Increased port congestion at some locations, and
  • Possible fee increases and delays.

Since the 2008 global economic downturn, container shipping lines have sought to pool resources in response to overcapacity and low freight shipping rates which have plagued the industry. According to a Reuters article appearing in the online publication gCaptain, 2M Alliance representatives report that their motivation for the alliance is to save an estimated $350 million or more annually on European, transatlantic, and transpacific services. Despite their assurances to the contrary, it appears likely that this alliance will exacerbate existing challenges such as port delays and chassis shortages, as well as result in higher costs for moving freight.

2M Alliance Breakdown

Source: www.joc.com

The primary driver for this sentiment is that the 2M Alliance will have APM[1] terminals serving the Maersk Line and MSC, while CMA CGM will move operations to the Port Newark Container Terminal (PNCT) in northern New Jersey. CMA CGM is the third largest worldwide shipping company and operates a fleet of 428 ships with capacity of 1,556,000 TEU on 170 shipping routes. In addition to its huge global port terminal interests, APM Terminals operate at eight (8) U.S. Ports. This includes its Pier 400 terminal at the Port of Los Angeles, which is the largest single proprietary terminal in the world.

Trucking organizations like the Association of Bi-State Motor Carriers have spoken out on the ways this alliance will cause logistical and financial problems for affected intermodal transporters as well as container terminals like the PNCT, which has a long-term lease agreement with the PANYNJ and handles over 600,000 containers annually. This organized group of trucking industry owners and operators specifically deals with ways to overcome challenges affecting the intermodal industry serving the Port of New York-New Jersey. It currently represents over 70 percent of the port and container traffic at PNCT with more than 130 members from trucking and trucking-industry related companies doing business there.

The Association of Bi-State Motor Carriers sent a letter of concern to its members, which was also sent to the Federal Maritime Commission (FMC) and the PANYNJ. In the letter, the organization pointed out how the 2M Alliance will add greater expense for transporters from the empty container returns at the terminal. In addition, it will exacerbate already inadequate chassis supply issues, due to chassis migration and chassis usage at the two locations.

According to the Association of Bi-State Motor Carriers these issues will result in increased costs, a drain on already strained resources, and ultimately, increased charges being passed on to consumers. The Association members have already been dealing with service problems at APM terminal locations, which they see as only increasing with the changes that will result from the impending 2M Alliance.

It is also no coincidence that the two 2M Alliance member companies are leading the trend toward increasingly larger container vessels. This is also a contributing factor to port congestion, as already struggling ports are required to handle larger quantities of cargo and more shipping containers at one time. Too few available chassis for moving container cargo and the resulting port congestion are likely to increase schedule delays, costs for transporters and result in higher prices for consumers.

The FMC estimates that the 2M Alliance will give these two (2) powerhouse companies the largest market share of all current shipping alliances on the key transatlantic trade routes. It is a scaled-back version of the original alliance that was not approved by the FMC.

The Association of Bi-State Motor Carriers was dismayed that its members were not part of the lengthy decision and approval process that led to the approval of the 2M Alliance, and while the 2M Alliance partners say that the move will not cause untold disruptions or increased costs for the motor carriers, this remains to be seen.

 

[1]APM stands for Arnold Peter Moller who is more commonly known as A.P. Moller. In 1904, he founded A.P. Moller-Maersk, which is the world’s largest container shipping operator.

 

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