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MSC And Maersk Alliance To End 2025; MSC Investing In New Vessels, Maersk In Logistics

MSC and Maersk alliance to end 2025; MSC investing in new vessels, Maersk in logistics

MSC and Maersk alliance to end 2025; MSC investing in new vessels, Maersk in logistics

This year the two shipping companies confirmed that the so-called 2M alliance will end in 2025 Mediterranean Shipping Company and AP Møller-Maersk that since 2015 set aside their rivalry and shrugged off opposition from regulators to form a capacity-sharing alliance have now agreed to part, with different focus in the future of the industry. Maersk containers could be carried on MSC vessels and vice versa, cutting both groups’ operating costs without reducing the number of ports they could serve. The pact helped reshape container shipping, an industry whose profits had traditionally been tied to the ebbs and flows of the global economy. Within two years, other big players such as France’s CMA CGM, China’s Cosco and German liner Hapag-Lloyd had struck similar deals. But now MSC, based in Switzerland but controlled by an Italian family, and Maersk, the venerable Danish conglomerate, are divorcing. This year they confirmed that the so-called 2M alliance will end in 2025. Eight years after the agreement began, the dynamics of the container shipping business are starting to change dramatically — in ways that have important implications for the future pattern of globalization. The context is the boom the two companies enjoyed during the Covid-19 pandemic. After years of highly cyclical and often weak earnings, shipping lines enjoyed record profits as ships queued up at ports to unload and customers raced to get goods on to a diminishing number of available vessels. Bumper profits have given Maersk and MSC the freedom to sever ties and to invest heavily, but the two companies are taking strikingly different approaches to the future of their industry. MSC has ordered a significant number of new ships and last year overtook Maersk in terms of tonnage — an apparent bet on the continued growth in global trade. Maersk, on the other hand, is investing in broader logistics facilities, such as new warehouses, trucks and planes, in an effort to appeal to customers worried about future supply chain disruptions. As the two lines plot their very different courses, industry observers are uncertain which, if either, strategy will pay off. Large box carriers have more money “than they can use,” says Lars Jensen, chief executive of the shipping consultancy Vespucci Maritime. With trade now slowing after the dislocations of the pandemic, they have a rare opportunity to make that cash count. But the years of abnormal profits have also drawn regulatory and public scrutiny, while owners of heavily polluting ships are under pressure to invest in curbing emissions. The industry that helped oil the wheels of globalization must now weather its aftermath: reshoring and increased economic nationalism. Setting new courses This is not the first time that Maersk has attempted to tilt its business beyond sea freight. Jensen, a former Maersk researcher, points out that the group tried to break into logistics about two decades ago, before the financial crisis of 2008 scuppered investment plans across the industry. Now, Maersk’s chief executive, Vincent Clerc, has set an ambitious target for logistics earnings to overtake those of the shipping operation within a decade. Its logistics and supply chain services unit generated a fifth of the group’s overall sales and less than 5 per cent of profits in 2022. Since 2019, the group has used its bumper earnings to acquire at least 11 companies, among them the US$ 3.6bn takeover of LF Logistics last year. The Hong Kong group’s 198 warehouses helped Maersk double the number of sheds it owned that year. Clerc’s hope is that a premium, end-to-end supply chain service will appeal to the big retailers whom it has focused on building relationships with. “In the Covid years, [supply chain] vulnerability was really laid bare,” he says. “The idea was [that] you create solutions for these large customers that, today, have to contend with very, very volatile supply chains.” Maersk had been allocating more shipping capacity to customers most likely to buy into these solutions, and Clerc argues that Maersk’s expansion into logistics will make it more resilient during economic downturns. But he risks antagonizing the freight forwarders who handle cargo for smaller retailers and group it together to help fill containers. Its move inland is turning these businesses from customers into competitors. Jensen says that “quite a few” have told him over the past year that they are reducing business with Maersk because of its new strategy and a perception that the carrier has not recently offered them sufficient capacity. The challenge for Maersk is growing its logistics business at scale, […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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