Two largest ocean cargo carriers form 2M Network

When the P3 Network was nixed by China last month, mega ocean cargo carriers were facing a vexing dilemma: how to reorganize global services and still make money. Two of the world’s biggest –  Maersk Line and Mediterranean Shipping Co – may have solved that problem by creating the 2M Network today. But where does that leave CMA-CGM? Free to explore other options, it would seem.

Maersk and MSC have signed a 10-year contract deal to share vessels on some of the world’s busiest trade routes.

Apart from being a smaller market share agreement, it also differs from the P3 Network by being a pure-play VSA. There will be no jointly-owned independent entity with executional powers.

“Vessel-sharing arrangements are nothing new, but they have gotten larger due to the sustained over capacity situation,” says Brian M. Conrad, Executive Administrator, Transpacific Stabilization Agreement (TSA). “Carriers ordered vessels based on assumptions of a quicker recovery in global trade growth, and on the urgent need to manage costs through greater economies of scale. Roughly a third of global container lines posted profits in 2013, most from cost-cutting, not top line growth.”

In the transpacific, adds Conrad, no major carrier operated profitably and the trade as a whole has seen only five profitable quarters in the past five years.

The VSA will include 185 vessels with an estimated capacity of 2.1 million TEU, deployed on 21 strings. The overall purpose of the cooperation is to share infrastructure (network).

According to Maersk, shippers will have more stable and frequent services reaching more ports with direct service. At the same time, the VSA should improve the efficiency of the Maersk Line and MSC networks through better utilization of vessel capacity and economies of scale.

“Our agreement with MSC is a step towards achieving all of these objectives in the East-West trades,” says Søren Skou, Maersk Line CEO.