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In a significant development, the world’s top two global carriers — MSC Mediterranean Shipping Company of Switzerland and Maersk of Denmark — have mutually agreed to terminate in January 2025, the present 2M alliance formed between them in 2015.
The container shipping line vessel sharing agreement (VSA) was formed to ensure competitive and cost-efficient operations on the Asia-Europe, Trans Atlantic and Trans Pacific trades. It had a minimum term of 10-years with a 2-year notice period of termination.
In a joint statement, CEO Vincent Clerc of A P Moller — Maersk, and CEO Soren Toft of MSC said: “MSC and Maersk recognise 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.”
Financial strengths
The 2M alliance was formed at a time when the industry was facing years of losses and excess capacity. It helped in managing the volume better through VSA between the two market leaders.
However, during the Covid pandemic, all the major shipping lines posted record revenue as there was record movement or cargo by sea and carriers earned very good freight rates. The improved financial strengths could be a major reason for the break up as both can charter their own path, said an industry source.
What could the breakup mean for the trade? Sebastian Wrobel, an expert in Supply Chairman Management based in Germany, in a social media post says with the dissolution of the alliance, both companies will definitely compete more directly with each other on the Asia-Europe, Transa Atlantic and Trans Pacific trades.
Changes in pricing
The end of the alliance could lead to changes in pricing for customers as the companies attempt to differentiate themselves from each other and increase market share.
Without the alliance, Maersk may need to increase its fleet size to maintain the same level of capacity. The dissolution of the alliance could also lead to changes in service offerings as the companies attempt to differentiate themselves and attract customers, he adds.
Lars Jensen, an expert in the container shipping industry based in Denmark, feels that this is only the beginning of a reshaping of the alliance/VSA constellations especially on the major east-west trades.
This will change the competitive dynamics on the major east-west trades for all major carriers, and clearly all carriers will take a close look at which threats and opportunities this will bring forth.
Even if the 2M alliance runs until January 2025 it should be expected that Maersk and MSC networks on the alliance trades will begin to deviate even more in 2023 through different VSA and slot charter agreements, he said in a social media post.
Diversify services
According to Jon Monroe, a shipping expert based in the US says the breaking up of the alliance of the top two global carriers could turn into benefits for the shipping community. Each has a different strategy post Covid.
Maersk is attempting to diversify into first mile and last mile services thereby competing with non vessel owning common carriers (NVOCC) and MSC as a more NVOCC friendly carrier, aggressively expanding capacity, he said.
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