Goodbye P3, hello 2M.
It didn’t take long after China halted plans for the P3 Network, what would have been an operational alliance between the three biggest carriers in the international shipping industry, for two of the P3 carriers to replace the P3 with a vessel sharing agreement.
Maersk and MSC both put out Press releases a week ago to announce a ten-year vessel sharing agreement called the 2M.
The press releases say the vessel sharing agreement will include 185 vessels on 21 strings, with around 2.1 million TEU of capacity.
Both MSC and Maersk seem quite pleased with this vessel sharing agreement.
“MSC is pleased to have reached this agreement with Maersk Line. It represents another positive step in our continual drive to enhance our operational network in terms of scope, scale, efficiency and reliability. Our customers will be able to enjoy these benefits alongside the world class customer service that has been the cornerstone of our business since our formation in 1970.” says Diego Aponte, MSC Vice President.
Mr. Aponte continues “The 2M Vessel Sharing Agreement will enable us to achieve significant reductions in fuel consumption, driving down the carbon footprint of our shipping operations. With sustainability a key area of focus for MSC, we’re delighted that this vessel sharing agreement will mean major cuts in emissions while simultaneously enhancing our service to customers.”
Likewise, Maersk officials gushed about the vessel sharing agreement:
“I am very pleased with our agreement with MSC. We share the same ambition to have as efficient and effective operations as possible. We will continue to provide our customers with competitive and reliable container shipping in the East-West trades at attractive prices. To do so we have to be innovative and take out cost, while keeping a product that is best in class for our customers in terms of coverage, frequency and reliability. Our agreement with MSC is a step towards achieving all of these objectives in the East-West trades,” says Søren Skou, Maersk Line CEO.
Maersk Group CEO Nils S. Andersen welcomes the agreement with MSC.
“Over the last years, Maersk Line has established itself as a leader in the industry through its customer focus and by improving its competitive cost position. With this agreement Maersk Line will be able to further enhance its customer offering while also reducing costs and CO2 emissions. I am confident that Maersk Line’s leadership, also after this positive step, will continue to find new ways to strengthen its customer experience,” says Nils S. Andersen.
While MSC and Maersk are pleased, does the last remaining would-be P3 member, CMA CGM feel left out?
A Wall Street Journal article reports:
The cost savings that Mærsk and MSC stand to realize from the 2M pact present a challenge for CMA CGM, given that the French company currently collaborates with the 2M partners on some services, [chief executive of Copenhagen-based Sea Intel Maritime Analysis] Mr. [Lars] Jensen said. CMA CGM will need new vessel-sharing agreements with other companies “in order to maintain the competitiveness of their own product offering,” he said.
Their exact feelings on the vessel sharing agreement are not known as CMA CGM has declined to comment on it so far.
MSC and Maersk have been fast to point out the differences between this 2M vessel sharing agreement and the P3 Network. Of course, it makes sense they would do so, not wanting to have it shut down.
Both press releases were careful to point out how the 2M’s combined market share is much smaller than the P3 Network’s would have been. The second difference both conveyed was that this agreement is purely a vessel sharing agreement and does not set up a jointly owned but independent organization with executable powers like the P3 Network would have created.
As such, the 2M vessel sharing agreement does not need the kind of approval that was necessary for the P3 Network. Maersk and MSC can go right into operation with this vessel sharing plan.
Here are 12 points Maersk and MSC shared about the 2M vessel sharing agreement in their press releases.
- The VSA will improve the network efficiency and allow for lower slot costs through improved utilisation of vessel capacity and economies of scale.
- The VSA will provide more sailings and direct port pairs than the parties offer today individually.
- The VSA includes 185 vessels with an estimated capacity of 2.1 million TEU on 21 strings in the Asia –Europe, Transatlantic (Europe – US East Coast) and Transpacific (Asia – US East & West Coast) trades.
- The 21 strings are split as follows: Asia/North Europe: 6, Asia/Mediterranean: 4, Asia/US West Coast: 4, Asia/US East Coast: 2, North Europe/USA: 3, Mediterranean/USA: 2.
- Maersk Line will contribute with approximately 110 vessels with a nominal capacity of app. 1.2 million TEU (55% of the total capacity).
- MSC will contribute with approximately 75 vessels with a nominal capacity of app. 0.9 million TEU (45% of the total capacity).
- Vessels deployed in the VSA will continue to be owned (or chartered) and operated by the two individual lines.
- The VSA does not include joint marine operations. Each party will thus execute their own operations including stowage, voyage planning and port operations.
- The VSA does not include any commercial tasks or responsibilities. Each party will continue to have fully independent sales, pricing, marketing, and customer service functions.
- A joint coordination committee will monitor the network on a daily basis.
- The duration of the VSA is 10 years.
- The VSA is expected to start early 2015. The starting date is conditioned by filing of information to and in some cases approvals by relevant authorities.
While the 2M won’t save Maersk or MSC the one billion dollars a year that the P3 was expected to save the ocean freight shipping companies, the cost savings the two companies will receive from this vessel sharing agreement should be substantial.
What are your thoughts on the new 2M? Good? Bad? Put your thoughts in the comments section below.