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End of 2M alliance to shake up container shipping market, could trigger price war

Highlights

MSC, Maersk to end vessel-sharing agreement in 2025

Maersk says wants to focus on its own Integrator strategy

Domino effect for other alliances predicted by industry sources

  • Author
  • Ayush Verma
  • Editor
  • Daniel Lalor
  • Commodity
  • Shipping

The container shipping market could be set to see a price war after Maersk and Mediterranean Shipping Company -- the two largest lines in the world by active fleet capacity -- announced an end to their 2M alliance, a vessel-sharing agreement signed in 2015.

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Sources also said Jan. 25 that other alliances in the industry could come under pressure.

"In the near term, it is not ideal," a carrier source said. "We could see a rate war like 10 years ago that could trigger a sharp drop in spot rates and could also lead to shake-ups in the remaining alliances."

A.P. Moller-Maersk CEO Vincent Clerc and MSC CEO Soren Toft said in a joint statement: "MSC and Maersk recognize that much has changed since the two companies signed the 10-year agreement in 2015. Discontinuing the 2M alliance paves the way for both companies to continue to pursue their individual strategies."

"I suppose there will be more competition [in the market now], thus driving prices down further," a Singapore-based logistics provider said. "In a time like this, it seems weird to go separate ways."

A year on from losing its top spot as the largest container line in the world to its alliance partner, Danish carrier Maersk said that since forming the alliance in 2015, its strategies have changed and it wanted "to accelerate becoming an integrated provider of logistics, connecting, and simplifying our customers' supply chains."

Discontinuing the 2M alliance paves the way for Maersk to efficiently focus on its Integrator strategy, it said.

"The shape of a generation-old industry is going through one of the most decisive periods," an Indian logistics source said. "While changes took investments, the underlying fundamentals always remained within a single-digit bottom line traversed with mergers and acquisitions to higher borrowings. Only post-COVID, the revenues flood gates have opened and with it the freewheel to define independent trajectories of presence, expansion and growth."

However, with demand on most major trade lanes yet to see a sign of recovery, sources said large-scale operators with big fleets could struggle to fill their vessels without alliance cargo commitments.

"We do not foresee demand recovering that quickly, so it is going to be very difficult for the larger liners to fill their vessels or utilize all their capacity with their dedicated services," the carrier source said.

"So, they are going to have to find that additional cargo from similar arrangements. Maybe, MSC or Maersk will go and join one of the other existing alliances, or perhaps, we will see new arrangements and VSAs [vessel-sharing agreements]."

As per Maersk and MSC, their VSA was formed to ensure competitive and cost-efficient operations on the Asia-Europe, trans-Atlantic and trans-Pacific trades, and had a minimum term of 10 years with a two-year notice period of termination, which the two partners have now mutually triggered.

Beyond 2M, two other alliances control a significant share of the global container fleet -- THE alliance with Ocean Network Express (ONE), Hapag-Lloyd, HMM, and Yang Ming as members and the Ocean Alliance with CMA CGM, OOCL, Evergreen, and COSCO shipping lines as members.

"It [2M alliance ending] could have a domino effect on the rest of the alliances," a logistics manager for a large-scale Australian shipper said.

"All carriers will take a close look at the threats and opportunities this will bring forth. The fun starts now!"