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Can shipping alliances offer better supply chain?

The giant shipping alliance between the world's three largest ocean carriers that is set to be launched on the global market is already making waves across the industry.

And it is not just other carriers who are worried about the impact of the new vessel-sharing P3 Alliance that is set to roll into action later next year (2014).

The three container carrying giants; Maersk Line, CMA CGM and Mediterranean Shipping Co, have agreed to pool a reported 255 vessels on three key routes: Asia-Europe, trans-Pacific and trans-Atlantic.

According to early estimates, the partners will command a 42 per cent market share on the Asia-Europe route, 24 per cent of trans-Pacific trade and up to 42 per cent on the Atlantic route.

The move comes against a backdrop of volatile rates and overcapacity in the shipping sector, issues which KC Group Shipping has been highlighting for some time now.

The alliance believes its move will bring some much needed stability to the market and it is "entirely about sharing infrastructure".

According to reports, this new working agreement will see the formation of an independent network centre aimed at operating the vessels efficiently and offering better service and reliability to customers.

The impact it will have on the carbon footprints of the three giant alliance partners is also being heralded as another positive reason for moving ahead with the P3 concept.

There is no doubt that the commercial benefits for the three companies involved in the alliance will be great.

According to a recent report, Maersk Line could cut its costs by up to $1billion on the Asia-Europe route as a result of P3.

However, here at KC Group we can clearly see there is a growing belief that this deal will be a major game-changer for the container shipping sector, with an impact far beyond cost control.

Other smaller container shipping groups and alliances are increasingly looking at the situation with some anxiety.

Shippers in the US have also spoken of their concern about the impact the P3 agreement may have on freight rates and service availability.

And, according to reports, the regulatory authorities in the US and Europe are keeping a close eye on the situation.

So what does the alliance mean for the UK and Europe and the logistics sector here?

At KC Group, we have been keeping a close eye on developments and we believe it will have a massive impact on the markets we operate in.

Crucially, we expect P3 to bring the stability that is so badly needed in the market today.

Volatility of prices is something that has been a real challenge to our operations and that of our clients over the past five years.

Stability of freight rates has to be welcomed.

So too is the reduction of overcapacity. However, the danger is that all this brings with it added cost and a escalation of those rates, as a result of having fewer services on these key trade routes.

Here at KC Group Shipping, we believe that the move will bring the stability that is needed.

The big question in all this remains, at what level will the rates be stabilised?

As we stress, there is no doubt that stability is required in the global shipping market. But what price will the industry pay to get it?

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