Business of Shipping and Logistics Shipping alliance and its impacts on Asian carriers T. L. Yip ATTSS 2014 17 November 2014 1.

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Business of Shipping and Logistics Shipping alliance and its impacts on Asian carriers T. L. Yip ATTSS November

Business of Shipping and Logistics Shipping Alliances  Expand the strategic alliances with other carriers  Charter slots  Utilize the capacity of each vessel  Achieve economies of scales 2

Business of Shipping and Logistics Direct routes S1S1 S2S2 D1D1 D2D2 Largest ship 8,000 TEU (before 2003)

Business of Shipping and Logistics Transshipment (Hub-and-spoke) S1S1 S2S2 D1D1 D2D2 Largest ship 12,000 TEU (before 2011)

Business of Shipping and Logistics Loop routes (milk run) S1S1 S2S2 D1D1 D2D2 Largest ship 18,000 TEU (after 2013)

Independent Operation 6 Market 1Market 2 Tonnage 1 Tonnage 2 Carrier 1 Carrier 2

Shipping Alliance 7 Market 1Market 2 Tonnage 1 Tonnage 2 Carrier 1 Carrier 2 Interdependent market Slot charter

Business of Shipping and Logistics Modelling Excess supply (ship tonnage) Weak demand (trade for transport) Mutual charter (shipping alliance) Satisfy all shippers (very high lost-sales cost) 8

Summary Shipping market: Supply excess Demand Carriers are reducing tonnage efficiency. Carriers in an alliance charter ships mutually. In a competing market, carriers intend to charter mutually and will charge similarly. Sizeable chartering will be maintained.