The document discusses collaboration in the container shipping industry, specifically regarding container inventory management. It provides background on collaboration, noting that independent firms can achieve common goals through collaboration. It then discusses the historical development of collaboration in the form of liner conferences between shipping lines. More recently, major shipping lines have formed alliances that facilitate vessel sharing and equipment interchange. The document proposes that shipping lines could form a virtual container pool to help manage empty container repositioning at a lower cost. By collaboratively exchanging containers based on supply and demand imbalances between ports, the lines could save an estimated $15.8 million annually for Sri Lanka trade alone. It concludes by recommending increased industry awareness, research, and a software tool to help facilitate

1. Lalith Edirisinghe
CINEC Maritime Campus
Seminar organized by Ceylon Association of Ships’ Agents –CASA
to commemorate the
Maritime week of Sri Lanka
21.09.2015 -2.30 pm to 5.30 pm
at the Main Auditorium Ceylon Chamber of Commerce

2. Preamble
What is collaboration?
Can Shipping lines collaborate?
Collaboration in Container Shipping industry
Diachronic view (Historical development)
Synchronic view (at a point in time)
The way forward; Collaborating for Container
Inventory Management
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4. Collaboration
Collaboration involves two or more independent
firms
The players with different complementary
capabilities may achieve their common aspirations
and goals in a competitive environment [(1+1) > 2]
Collaboration leads to achievement of collective goals
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5. What is collaboration?
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It positively affects corporate profitability by both
increasing sales and decreasing costs
Therefore, collaboration among container lines in
the form of container sharing could be a solution to
the container imbalance.

6. Can shipping lines
collaborate?
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Yes, Like in any other business
Supply chain collaboration
Vertical – Trade (Shippers & Consignees) >> Ports
>> Boarder Management >> Agents >>
CFS>> Banks >> Training institutes>>
etc.etc.
Horizontal- Between carriers

7. Diachronic Perspectives
The form of liner conferences is evident since the
nineteenth century
They are associations of ship-owners operating on the
same route, served by a secretariat
They fixed prices and regulate capacity
Liner conferences were most prevalent on routes
between Europe, North America and the Far East
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Collaboration between Carriers

8. Examples: IPBCC
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IPBCC - the oldest liner shipping conference
Established initially as the Calcutta Steam Traffic
Conference
Later became IPBCC- India-Pakistan-Bangladesh-
Ceylon Conferences
15-member s
 ANL, CMA CGM, Hamburg Sud, Hapag-Lloyd, "K" Line,
Maersk Line, MISC Berhad, CSAV Norasia, Shipping Corp. of
India, PNSC, Rickmers, Safmarine, United Arab Shipping
Corp., Yang Ming and Zim Integrated Shipping Services.
It ceased operations, 2008 Oct. 17

9. Conference Line
Operators agree to maintain a similar rate structure
to all the advertised ports
Lines operating within that Conference maintain a
full monopoly on that trade route
Vessel operators within the same conference
maintain their own rate structures
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10. Demise of Conferences
Anti-trust rules opposed cartel-like anti-competitive
behavior
 However, liner-shipping conferences survived until
2008
Shippers and trade bodies had persistent complaints
about these cartels
United States Shipping Acts of 1984 and 1998 have
weakened the ability of conferences
The EC regulated conferences more severely since the
late 1980 s
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The Transpacific Trade For 2006 Through 2010
Carrier Agreements

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The Transpacific Trade For 2006 Through 2010
Carrier Agreements contd…

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US/North Europe Trade for 2006 through 2010
Carrier Agreements contd…

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Source: Federal Maritime
Commission, Bureau of Trade
Analysis, Agreements Library
US/North Europe Trade for 2006 through 2010
Carrier Agreements contd…

15.  2M
 Maersk
 Mediterranean Shipping Co.
 Ocean 3
 CMA CGM
 United Arab Shipping Co.
 China Shipping
 CKYHE
 Cosco
 “K” Line
 Yang Ming
 Hanjin
 Evergreen
 G6
 APL
 MOL
 Hyundai Merchant Marine
 OOCL
 NYK Line
 Hapag-Lloyd
15
Synchronic view 2+2=95
Four carrier alliances will control 95 percent of the cargo volumes
moving in the major east-west trades - Journal of Commerce (JOC) ,2015

16. P3 — a different kind of alliance
Traditional alliances co-operate in the form of vessel sharing
and slot exchanges
Participants in P3will set up a service network centre to
oversee day-to-day operation and reserve technical
management only to themselves (Lloyd's List .Com,2015)
16

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The way forward; Collaborating in Container Management

18. Containers are not ‘one time investment’
The management of container fleets, is a costly
operation
Shipping companies globally spend $110 billion per
year in the management of their container fleets
This involves purchase, maintenance and repairs
A major challenge revolves around repositioning
empty reusable containers
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Collaborating in
Container management

19. Container Re-positioning
Empty containers accounted for 23% of port
handlings worldwide in 2002
This percentage has remained fairly consistent for the
past 20 years
Repositioning of global empties costs $16 billion
annually
Extensive researches on empty re-positioning are
evident
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20. Statistics from Sri Lanka
289,474 TEU s empty containers (MTY) were
evacuated from port of Colombo in the year 2014
11.6 percent growth against 2013
Paradoxically, shipping lines have imported 48,629
TEUs of empty containers to SL in 2014
24.3 percent growth from 2013
(CASA Per. Review, 2015)
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21. Container Exchange
between carriers
Carriers’ agreements have provisions to exchange
containers but no evidence of exchange in reality
Sri Lanka spends $ 100 Million every year on empty
container re-position
This money is ultimately borne by consumers
Carriers may find a mechanism to reduce repo cost
through collaboration
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22. Ground work is done
17 mega carriers are members of alliance agreements
that facilitates equipment interchange
They represent approximately 82% of the total
container trade
If carriers form a Virtual Container Pool (VCP)
empty REPO cost may be reduced
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23. Carrier Agreements that
facilitate Container exchange
(US/North Trade for 2006 through 2010)
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Number Name Members
1 11375 Trans-Atlantic Conference Agreement ACL, Maersk, MSC, NYK, OOCL
2 11280 Star West Joint Service Agreement Albion, Overseas
3 11854 Greensea Inc. Joint Service Agreement Green Chartering,
4 11982 Evergreen Line Joint Service Agreement Evergreen, Hatsu, Italia
5 11602 The Grand Agreement II HL, NYK, OOCL
6 11960 New World Agreement APL, Hyundai, MOL
7 10955 ACL/H-L Reciprocal Space Charter and Sailing Agreement ACL, HL
8 11415 MPA Space Charter and Sailing Agreement ACL, MSC
9 11705 Grand Alliance-CP Ships Atlantic Agreement CP, HL, NYK, OOCL, PO
10 11794
The COSCON/KL/YMUK/ Hanjin Worldwide Slot
Allocation and Sailing Agreement Cosco, HJ, KL, YM
11 11867
Norasia/GSL Round The World Service Agreement
CMA CGM/CSCL/ELJSA Cross Space Charter, Gold, Norasia
12 11955 Sailing, and Cooperative Working Agreement China, CMA, Evergreen
13 11912 Dole-HSud Space Charter and Sailing Agreement Dole, HSud
14 11927 ITS/Hatsu Marine MUS Slot Charter Agreement Italia, Hatsu
Source: Federal Maritime (2012)

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Number Name Members
1 11602 The Grand II NYK, OOCL, HL
2 11435 APL/HLAG Space Charter Agreement APL, HL
3 11794 COSCO/KL/YMUK/ HANJIN/Senator Worldwide Slot
Allocation & Sailing Agreement K-Line, Yang Ming, Hanjin, COSCO
4 11885 CMA CGM/MSC Reciprocal Space Charter, Sailing
And Cooperative Working Agreement
CMA CGM, MSC
5
11940
Cross Space Charter, Sailing And Cooperative Working
Agreement CMA CGM, Shipping
6 11948 CMA CGM/CSCL Cross Space Charter, Sailing And CWA-Central
China/US West Coast, Yang Tse/ AAC2 Service Shipping, CMA CGM
Source: Federal Maritime (2012)
Carrier Agreements that
facilitate Container exchange
(Transpacific Trade For 2006 Through 2010)

25. VCP -Virtual Container Pool
VCP is a strategic CIM solution
It can operate globally while keeping carriers’
individual identities intact
Each carrier may continue to control its own
inventories and exchange containers subject to
mutual agreement on case by case basis
As the pooling is done virtually the physical storage
of containers will not be a constraint
VCP expands the inventory of a carrier beyond its
existing individual capacity
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26. Evaluating Opportunities to
Exchange containers in Sri Lanka
(based on 2014 statistics)
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Container
Type& Size
Imbalance
when Work
alone
Imbalance when
Collaborate
Opportunity
to Exchange
Saving @
$ 500 per
REPO
20'GP 158221 156285 01.20% $968,000
40'GP 10486 794 92.40% $4,846,000
40'HC 44586 27842 37.60% $8,372,000
45'HC 2155 101 95.30% $1,077,500
20'&40'RF 5975 4791 19.80% $592,000
Total 221423 189813 14.30% $15,855,500
Source: Industry data

27. The way forward……..
Create the industry awareness regarding the
opportunities to exchange containers
Encourage scholars to do scientific research to find a
container exchange mechanism
Carriers should evaluate the provisions to exchange
containers in the existing alliance agreements and
implement them
Develop an software application to help Container
Exchange decisions
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28. First article on Evaluation of expected payoff through container
interchange was published in the International Journal of
Logistics Systems and Management –Switzerland in 2015
Container Exchange Model was first presented at the Global Port
Research Alliance held in May 2015 in Hong Kong
The idea of Virtual Container Pool will be presented at the Colombo
International Maritime Conference on 26th
this month in
Colombo
Container Inventory Management Matrix (6 ‘R’ Model) will be
introduced at the 14th World Conference on Transport Research
that will be held in Shanghai in 2016
The 3F Model and Multidimensional Index for Container Inventory
Management will be introduced in 2016
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My contribution to this
concept….

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