Topics related to the end of 2M Alliance
MSC and Maersk will go their separate ways, which pulled back the curtain on another industry era. That means the largest carriers can operate at scale outside of a formal alliance. The potential impact on factors such as long-term pricing can’t be underestimated. Alliances allowed the carriers via their partners to build extensive service networks, distribute and lower the costs of deploying tonnage, increase utilization, and engage in capacity management on a scale that had never been seen before. However, the breakup of the 2M Alliance calls into question the merit of the carriers’ alliance. It opens the possibility that the shipping industry reverts to a competitive scramble for market share, driving down profits and forcing yet another round of M&A, especially if regulators move against alliances.
The breakup of 2M leads to an increase in ad hoc slot swaps and vessel-sharing agreements (VSAs) on the major trades across alliance carriers, eventually settling into a landscape of more binding collaborations once more — but with carriers in different constellations than we see now. Other obvious dominoes are those related to digitalization and decarbonization.
MSC was right to end the 2M alliance with Maersk because the Danish container line is departing from the industry’s existing business model to one that won’t work, according to the head of London-based maritime consultancy Drewry. “That will be a big challenge for Maersk now as to how they manage its scale because they are too big to fit into one of the other alliances, even if the regulators would allow them, but they’re too small to be on their own. So this is a great difficulty for them.”
In 2016, Maersk bet the farm on a new container shipping model that focused on integrating logistics into its core offer. The strategy now faces a stress test as the market heads into the first significant downturn since then, and Maersk seeks to go it alone outside the alliance model after leaving the 2M Alliance.
Hamburg Süd has been run as a separate business based in Hamburg and allowed to keep its own identity within the group since Maersk’s acquisition in 2017. However, Maersk is to discontinue its Hamburg Süd and SeaLand brands in a major reorganization, according to Lloyd’s List.
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Blankings insufficient to hold off rates stagnation
Container lines face an increasing challenge to “right-size” capacity as freight rates continue to slide, with many spot market rates offered now being loss-making. With announcements of blanked sailings to limit supply, carriers had already responded to the fall in demand, but this had achieved mixed results, and rates remained “generally soft,” Jefferies said.
Read more: Lloyd’s List
West coast labor negotiations still stuck over Seattle strife
Negotiations between the International Longshore Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have remained deadlocked due to jurisdictional disputes in Seattle’s terminal 5, according to Lloyd’s List. The ILWU and the International Association of Machinists and Aerospace Workers are feuding over who performs specific work in the newly-reopened terminal. The former is holding up the contract negotiations with the PMA until the situation is resolved, people familiar with the matter told Lloyd’s List.
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Deglobalization policy puts economic growth at risk
The supply chain shock from the Covid pandemic has led to an increase in regional and local production. But it won’t provide the desired outcomes. Policymakers need to be careful of unintended consequences. A growing trend towards deglobalization and away from the market-based forces that have shaped trade for the past 50 years risks unforeseen consequences that could eventually reduce global growth.
Read more: Lloyd’s List
Vehicle carrier order book hits record 27% of the existing fleet
Recent new building contracts by Grimaldi and SAIC Anji Logistics have driven the backlog of pure car and truck carriers to 27% of the existing capacity in service. New building contracts for pure car and truck carriers show no sign of slowing down as operators play catch-up after years of minimal investment in new tonnage. SAIC Anji Logistics’ significant investment in the vehicle carrier sector reflects a strategy by the Chinese automotive industry to ship its rapidly growing export production on domestically owned ships rather than utilizing Scandinavian or Japanese operators, which have dominated this sector since the 1960s.
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New IMO rules force global reefer fleet to confront uncertain future
In its latest reefer market report, Dutch maritime consultancy Dynamar suggests that the reefer fleet, which played a critical role in shipping perishables during the pandemic, could be “forced into retirement” by new International Maritime Organization (IMO) pollution regulations. Dynamar says the carbon intensity indicator (CII) and energy efficiency of existing ships (EEXI) rules will force the aging reefer fleet to slow to speeds that won’t meet market requirements for perishable goods. Reefer ships will sail with an estimated reduction in the maximum speed of between 1 to 1.5 knots to comply with the IMO regulation.
Read more: JOC
Will CII be maritime’s digital game-changer?
New regulations aiming at reducing shipping’s carbon intensity could pave the way for a broader digitalization effort as shipowners turn to technology to improve fleet efficiency. Mr. Paolo Moretti, chief executive at the Italian classification society Registro Italiano Navale Services, explains that adopting the whole digitalization package is much more attractive for shipowners than in the past.
Read more: Lloyd’s List
FMC commissioner drops bid to use OSRA-22 for emergency data sharing
Federal Maritime Commission (FMC) member Carl Bentzel has called off an attempt to pry more information about cargo activity under the auspices of the Ocean Shipping Reform Act of 2022 (OSRA-22). After FMC staff recommendations, Bentzel said in a statement on 30 January that he was no longer endorsing the use of OSRA-22 to extract more information about the ocean leg of the supply chain because “current conditions do not necessitate the issuance of an emergency order.” Nevertheless, Bentzel said OSRA-22’s ability to force greater data sharing about ocean freight is a critical component of the law.
Read more: JOC
