Maersk and MSC to end 2M global shipping alliance

The world’s two biggest shipping lines said they would end their vessel-sharing partnership in 2025, a move that would shuffle a lineup of global alliances as demand for trade is weakening.

A.P. Moeller-Maersk and Mediterranean Shipping Co. created the so-called 2M alliance in 2015 to help them reduce costs by sharing cargo on major ocean routes. Rivals formed similar partnerships, creating the Ocean Alliance and THE Alliance. The three groups account for about 75% of global container-shipping capacity, according to data company Statista.

The decision to wind down the 2M alliance comes as shipowners are dealing with a drop in cargo and excess vessel capacity that has pushed down freight rates to prepandemic levels. That has shifted the balance of power back to customers of these alliances.

The alliances were formed to cut costs and squeeze smaller competitors, but now that volumes are falling there is less reason to share capacity, industry executives said. Some customers had complained to regulators the alliances were anticompetitive.

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Global trade volumes fell 9.5% year-over year in November 2022, according to London-based Container Trade Statistics, and global shipping rates have been sliding at a steep pace since early last year.

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Big cargo owners such as Amazon.com Inc. and Target Corp. are securing ocean freight rates that are about one-third less than last year’s contracts, according to container shippers and retail executives. 

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Retailers that import large volumes of goods typically sign fixed-term contracts with ocean shippers to avoid uncertainty in deliveries. When the Covid-19 pandemic upended supply chains and normal delivery patterns, shipowners were able to charge importers top dollar to secure spots on vessels moving containers from ports in China to the U.S. West Coast. 

Some importers are now opting to pay market rates instead of securing fixed-term contracts. The spot rate to send a container from Shanghai to Los Angeles was $1,323 this week, down from about $15,200 a year earlier, according to the Freightos Baltic Index. The average along the route was $1,525 in 2019. 

In a joint statement, the chief executives of Maersk and MSC said that much has changed since the 10-year deal was signed, and terminating the agreement will allow both companies to continue to pursue their individual strategies.

Maersk and MSC’s strategies have changed over the past five years, with Maersk pushing to become an end-to-end logistics operator with the focus on inland supply services while MSC has overtaken Maersk in the number of ships it operates, sharply building up its fleet.

MSC Chief Executive Soren Toft said that while 2M was instrumental in stabilizing the fragmented container market, MSC now had the scale to service all its customers on its own.

"Even if 2M formally runs until January 2025 it should be expected that Maersk’s and MSC’s networks on the alliance trades will begin to deviate even more in 2023," said Lars Jensen, CEO of Denmark-based Vespucci Maritime.

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He said the winding down of 2M raised questions over the future of the other two alliances, Ocean Alliance and THE Alliance. "This is only the beginning of a reshaping of vessel-sharing agreements on especially the major east-west trades," Mr. Jensen said. 

Container volumes across the Pacific are down about 30% so far in January compared with last year, according to operators and charterers. Shipowners have withdrawn sailings they added at the height of the Covid-19 pandemic. Retailers have scaled back imports as they adjust to weak holiday sales and bloated inventories.

"Our ocean freight has basically normalized to what it was prepandemic after paying up to 10 times more last year," said Wade Miquelon, CEO of fabrics and craft retailer Joann Inc., at an analyst event this month. "The ports have normalized. So the in-transit issues and all the penalties have pretty much faded away."

Target said in an email that it renegotiates its shipping rates regularly. The retailer’s chief operating officer, John Mulligan, said in November that container rates had come down by one-third and that they would come down further. He said the windfall would become evident this year when Target renegotiates freight rates.

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A spokeswoman for Amazon declined to comment.  

"It’s very unpredictable, both for us and our customers," Maersk CEO Vincent Clerc said in a December interview. "We made significant capacity adjustments, but the inventory corrections can take a few months to sort out."

The uncertainty has cut down the duration of fixed-rate contracts that shipowners are offering from one year to as short as three months. That is because daily spot rates are on a downward spiral, giving cargo owners the option to pick spot deals for some shipments rather than committing to longer contracts. 

Pricing will be under pressure for shipowners this year—and while cargo owners are getting discounted rates, they could face disruptions if ships end up idled or sailings are canceled, said Peter Sand, chief analyst at shipping trade body Bimco.  

—Sarah Nassauer and Dominic Chopping contributed to this article.