Freight rate 'carnage' warning as major shipping deal ends

26 January 2023

A potential shake-up of shipping company alliances could cause “carnage on freight rates”, as a decade-long deal between the world’s largest shipping companies comes to an end.

Maersk and MSC’s 2M partnership will not be renewed in 2025, the companies announced, in a move which could cause a “radical shake-up” in alliances between shipping companies.

Simon Heaney, senior manager of container research at shipping consultancy Drewry Logistics, said: “Such an event could lead to carnage in the freight rates market as new members court shippers over to their new teams.”

Heaney suggested the move was a result of MSC “outgrowing” Maersk after it became the global leader in container shipping in late 2021. Previously, Maersk had held the title for over a decade.

The 2M partnership was signed in 2015, enabling the world’s two largest shipping companies to share vessels and exchange port slots to control costs and maximise efficiency. Some 16 of the world’s largest container shipping companies are engaged in similar partnerships, accounting for 95% of container cargo volumes.

The decision not to renew the deal comes after MSC’s expansion of its fleet and Maersk’s vertical supply chain integration. The companies said the separation would allow them to better pursue their individual strategies.

“It would seem that MSC believes that it can better utilise these ships on its own, untethered by a partner with different priorities,” Heaney added.

“There is a risk that, because MSC will have to fill those ships on its own, it will return to its old market share/low-cost model, which could destabilise the market.”

Heaney explained Maersk would be unable to offer the same coverage to customers outside the deal. “It certainly feels like the end of 2M was initiated by MSC, which seems better equipped for independent living than its partner.”

Drewry suggested Maersk was suffering from an “identity crisis”, as it struggled to express what its integration strategy meant in reality.

Yannis Koliousis, associate professor of logistics and supply chain management at the Cranfield School of Management, told Supply Management: “Market players seek different commercial approaches and organic growth in the post-covid world. As with any 'divorce', we need to be mindful of potential local destabilising forces.

“The most important problems I see include securing capacity, securing capacity at ‘reasonable’ rates, rates being increased for certain routes and also reduction in the value added services (e.g. end-to-end supply chain visibility) that shippers currently receive.”

Johan Sigsgaard, head of ocean products at Maersk, said: “This decision is a natural next step in pursuing our integrator strategy. Since 2M was formed in 2015, Maersk's strategy has changed, as have the needs of our customers. Maersk wants to accelerate becoming an integrated provider of logistics, connecting, and simplifying our customers' supply chains.

“Today, we have a fleet size that is well-balanced to meet our volume requirements. The integrator challenge in 2025 is to better connect our ocean and landside networks. We have for several years now invested heavily in becoming an end-to-end integrated logistics company.”

Shipping firms saw record profits during the pandemic, taking home $186bn overall in 2021 alone. Businesses said they had been forced to increase freight procurement budgets as shipping costs spiralled, while there have been calls for an inquiry into the market.

MSC has been approached for comment.

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