It has been reported that on June 30th, California United Terminals (“CUT”) – Hyundai Merchant Marine’s (“HMM”) sister company and affiliated terminal operator – announced its intention to shut down its 91-acre facility in the Port of Los Angeles at Pier 400, perhaps marking the first tangible effect of the alliance-shifting that occurred on April 1st.
Those close to the industry predicted that alliance-shifting would inevitably spur parallel realignments in downstream terminals, as well as internal power struggles among consolidating carriers. CUT appears to have lost market share as an organic effect of the April 1st reset (see our previous articles on this topic), and will likely struggle both in the present and future to meet its minimum annual guarantee (“MAG”).
Although HMM takes part in 2M services as part of the Maersk/MSC/HMM Strategic Cooperation Agreement, it is not a formal member of the alliance's elite class of carriers. Moreover, CUT subleases its terminal space in Los Angeles from APMT, Maersk’s terminal operator, and is a significant recipient of 2M cargo. While CUT’s presumable struggle to meet its MAG is a likely factor in its decision to cease operations, the terminal’s closure also demonstrates the world’s two largest carriers’ ability to consistently enforce their will.
While HMM maintains a stake in the Port of Long Beach’s Pier T terminal including an independent and corresponding service, it would appear that bargaining power and market share among the industry leaders will continue to dictate downstream consolidation.