The world’s two biggest shipping lines said they will end their vessel-sharing partnership in 2025, a move that will upend the global alliance as business demand weakens.
and the Mediterranean Shipping Company created the so-called 2M alliance in 2015 To help them reduce costs by sharing cargo on major sea routes. become rivals equal partnership, Creating the Ocean Alliance and The Alliance. According to data company Statista, the three groups account for about 75% of global container-shipping capacity.
The decision to end the 2M alliance comes as the shipowners cargo drop handling and additional vessel capacity that has pushed reduction in freight rates to pre-pandemic levels. This has shifted the balance of power back to the clients of these alliances.
Industry executives said the alliances were formed to cut costs and squeeze out smaller competitors, but now that volumes are falling, there is less reason to share capacity. Some customers complained to regulators that the alliance was anti-competitive.
Global trade volumes are set to fall 9.5% year-on-year in November 2022, according to London-based Container Trade Statistics, and global shipping rates are falling at a faster pace than early last year.
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About a third are securing lower ocean freight rates than last year’s contracts, according to container shippers and retail executives.
Retailers who import goods in large quantities usually sign fixed-term contracts with ocean liners to avoid uncertainty in delivery. When the COVID-19 pandemic upended the supply chain and normal delivery patterns, shipowners were able to charge importers top dollar to secure spots on ships carrying containers from ports in China to the US West Coast.
Some importers are now opting to pay market rates instead of securing fixed term contracts. The spot rate to ship a container from Shanghai to Los Angeles was $1,323 this week, up from about $15,200 a year ago, according to the Freightos Baltic Index. The average along the route in 2019 was $1,525.
In a joint statement, the CEOs of Maersk and MSC said a lot has changed since then. 10 year deal was signed, and the termination of the agreement will allow both companies to continue their individual strategies.
Maersk and MSC’s strategy has changed over the past five years, with Maersk pushing to become a end-to-end logistics operator with focus inland delivery services While MSC has overtaken Maersk in the number of vessels it operates, it is rapidly building up its fleet.
MSC CEO Soren Toft said that while 2M had been instrumental in stabilizing the fragmented container market, MSC now had the scale to serve all of its customers.
“Even if 2M formally runs until January 2025, it should be expected that Maersk and MSC’s networks on alliance trades will start to diverge even more in 2023,” said Lars Jensen, CEO of Denmark-based Vespucci Maritime.
He said the closure of 2M raised questions about the future of the other two alliances, the Ocean Alliance and The Alliance. “This is especially the beginning of reshaping the vessel-sharing agreements on the major East-West trades,” said Mr. Jensen.
According to operators and charterers, container volumes in the Pacific are down about 30% so far in January compared to last year. Ship owners have taken back seafarers who were added at the peak of the COVID-19 pandemic. Retailers have reduced imports as they adjust to weak holiday sales and bloated inventories.
“Our ocean freight is basically back to normal after paying 10 times more last year than it was before the pandemic,” said Wade Mickelon, CEO of the Fabrics & Crafts retailer.
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at an analyst event this month. “Ports have become normal. Hence the in-transit issues and all penalties are largely done away with.
Target said in an email that it regularly renegotiates its shipping rates. The retailer’s chief operating officer, John Mulligan, said in November that container rates had come down by a third and would come down further. The windfall gains will become apparent this year when Target renegotiates freight rates, he added.
An Amazon spokeswoman declined to comment.
“This is very unexpected for both us and our customers,” Maersk CEO Vincent Clarke said in a December interview. “We have made significant capacity adjustments, but it may take a few months to resolve inventory corrections.”
The uncertainty has reduced the duration of fixed rate contracts that shipowners are offering from one year to three months. This is because daily spot rates are down, giving cargo owners the option of taking spot deals for a few shipments, rather than longer contracts.
Peter Sand, chief analyst at shipping trade body BIMCO, said pricing will be under pressure for shipowners this year – and while cargo owners are getting discounted rates, they may face constraints.
Sarah Nassauer and Dominic Chopping contributed to this article.
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