Maersk and MSC terminate its long standing vessel-sharing alliance

MSC Mediterranean Shipping Company and Maersk on Wednesday announced the ending of their eight-year vessel-sharing agreement as the fierce shipping rivalry over transporting goods hots up.

 The pact, known as the 2M alliance was signed in 2015, allowing the companies to better manage cargo volumes at a time when the industry faced years of losses and excess shipping capacity. But now as both the groups jostle for pole position in the container shipping sector, the alliance has been terminated.  MSC, whose chief executive Soren Toft was poached from Maersk in 2020, became the industry leader last year after half a century in its rival’s wake. Both groups have cashed in on soaring freight rates during the Covid-19 pandemic and have been investing in diverging strategies.

While MSC has piled money into enlarging its shipping fleet, Maersk has focused on expanding across the supply chain and making several billion-dollar acquisitions to bulk up its land-based logistics business. “Discontinuing the 2M alliance paves the way for both companies to continue to pursue their individual strategies,” said the Swiss and Danish companies’ chief executives in a joint statement, adding that they “look forward to a continued strong collaboration throughout the remainder of the agreement period”.

The 2M alliance gives MSC and Maersk (who together control two-fifths of all seaborne freight) the ability to offer customers more frequent departures than a single shipping line would do.

But under Toft, a former senior manager at Maersk, the secretive and private MSC has grown so quickly that analysts suggested in recent months that it had outgrown the alliance. Johan Sigsgaard, head of ocean products at Maersk, also told the Financial Times that the group has “the fleet size we need, the vessel size to remain competitive”.

Although the frequency of departures will be affected, he said Maersk preferred to have the “agility” to plan its own journeys to meet customers’ needs for a flexible supply chain. He said the move had nothing to do with recent regulatory scrutiny of the container shipping industry, after surging demand for goods and supply chain bottlenecks drove an extraordinary rise in freight rates from the summer of 2020 until the end of last year.

After a period of bumper profits, the container shipping industry now is witnessing leaner times, which is resulting in the sector facing a significant oversupply of ships — something that vessel-sharing arrangements have previously helped shipping groups to manage.

Maersk said it wont loose the ability to manage the capacity as ever since 2015 it has evolved significantly. Further the company’s several smaller partnerships in different parts of the world are believed to give the company a “more controlled backbone network”, and the flexibility it needs currently.

“We continue to strengthen and modernise our fleet, providing us with the scale we need for the most comprehensive ocean and short-sea shipping network in the market,” said Toft. “We remain focused on delivering high-quality, personal service to a wide range of clients.”

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