2M split driven by strategic differences between Maersk and MSC
The two carriers each have their own incompatible visions on how to be successful in box shipping
Much has changed in the strategic direction of both companies since the 2M alliance was first discussed in 2014. Those differences could no longer be contained under the agreement
DIVERGING strategies over the role of ocean shipping in their business models was largely behind the decision by Maersk and Mediterranean Shipping Co to disband their 2M alliance when the agreement expires in 2025.
“As we approached the end of the agreement in two years, we have looked into what is the right strategy for us,” Maersk chief product officer for Ocean Johan Sigsgaard told Lloyd’s List in an interview. “That has led to the conversation around whether 2M was the right response to our future strategy. We came to the conclusion that for us it wasn’t.”
Discussions to form the 2M began in 2014, ahead of its 2015 launch. At the time, container shipping was supersizing itself with the introduction of ultra-large containerships.
“As we phased them in it was useful to be in an alliance to bear the burden of growth a bit as these ships came on stream,” Mr Sigsgaard said.
But 10 years is a long time in shipping, and Maersk has a very different strategy today than it had in 2014.
“Our integrator strategy calls for some different things in the network, specifically very strong connectivity to the landside network,” he said. “Our customers are asking for a lot of flexibility, in terms of being able to change the network in lines with their changing demands. In our view taking this step now is a natural step for meeting the future needs of our integrator strategy and setting up a network that is more controlled by ourselves to respond to this.”
Sea-Intelligence chief executive Alan Murphy also pointed to the differing strategies as being behind the decision to terminate the agreement.
“I don’t think this is a one-sided breakup,” he told Lloyd’s List. “It seems like the two lines have over the past few years been moving in a very different direction, where clearly Maersk is banking on the whole end-to-end logistics plan. To put it bluntly, it appears that Maersk wants to make its money outside of shipping while MSC seems to be wanting to make its money just off container shipping.”
That drove different focuses, he added.
“For MSC, it is about running the ships as economically as possible and being profitable at an operator level. For Maersk, it seems more like the ocean part of it is part of a bigger thing.”
This had practical effects in areas like schedule reliability, for example.
“Having a different focus on that means that you have different operational priorities, which I think have been difficult to bridge,” Mr Murphy said. “Maersk has always been strong on schedule reliability and have, rightly or wrongly, felt hemmed in by MSC. If they are to offer the value-added service they aim to, that can be difficult if your partner wants to run the vessels as economically as possible and make money as a line alone.”
MSC’s strategy has been devoted to capacity growth, he added.
“It seems that MSC has made the calculation that it can cover the network it needs itself,” he said. “The advantage of an alliance is scale but if you have the scale yourself what is the advantage of the alliance relative to the cost? The cost of the alliance is that you lose your uniqueness and product differentiation because effectively you are offering the same product.”
MSC’s growth spurt also means that by 2026, it will have enough ships to fully replace all of Maersk’s contributions to the current 2M offering, according to Linerlytica analyst Hua Joo Tan.
“Maersk has more to lose from the break-up and they have been outmanoeuvred this time,” he said. “Maersk, on the other hand, is unprepared and has limited options post-2M. If Maersk were to go it alone, it would fall behind MSC, the Ocean Alliance and The Alliance.
Mr Tan suggests Maersk will need to either court another partner or rebuild its capacity share.
Mr Sigsgaard, however, sees it differently.
“In our view taking this step now is a natural step for meeting the future needs of our integrator strategy and setting up a network that is more controlled by ourselves to respond to this,” he said.
This could change in time, he said, and he doesn’t rule out another alliance partnership entirely.
“We can’t rule out anything happening in 10 years from now, but what we see is a situation right now where we have a lot of alliances that are smaller. 2M was a super alliance where we put everything together with a partner. But as we step out of this, we do not step out of the agreement to step into another agreement with another partner.”
But that is not the same as saying Maersk would not have alliances or partnerships, he added.
“We have 40-50 of these smaller partnerships all over the world but typically these are more targeted, flexible and supplementary to an independent network. I think we will continue to see them being very helpful to us.”