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2M and the competitive landscape of container shipping

2M and the competitive landscape of container shipping
Approval of 2M by US regulatory authorities will allow Maersk Line to return to plan for at least the next two years based on the deployment of triple-E ships on order and no more. But a head-on clash with a newly formed competitor may be in the works.

Maersk and Mediterranean Shipping Co (MSC) won permission from the US Federal Maritime Commission on a split decision to enter into a vessel sharing agreement of the liner industry's two largest carriers. According to the carriers, approval is not required by the Chinese authorities that shot down a more ambitious plan that included CMA CGM. That carrier is now heading up Ocean 3, a new VSA with United Arab Shipping Co (USAC) and China Shipping Container Line (CSCL).

Maersk is on record that it will not order any new tonnage before next year and would rely on the charter market and the phase-in of ships on order for any growth tonnage needed through 2017. The company is signaling a slowdown in the fight for additional market share and suggesting that competitors stop ordering more ships until the market is in balance.

Whether competitors will comply is dubious, but most are losing money while Maersk is not. And nearby problems remain. First, freight rates have taken another nosedive recently on the key Asia - Europe and transpacific trades as carriers continue to phase in capacity from larger vessels faster than market growth.

Second, new industry sulphur regulations due to kick in 1 January could increase the cost of fuel by 50%. Carriers are readying surcharges to offset the extra cost, but this will run head-on into pressure on rates.

With new, large fuel-efficient ships on the water and on order, 2M is counting on a relative advantage in a game of surcharges.

As to competition, deployment plans released by 2M and Ocean 3 suggest an early collision in the Mediterranean trade.
Each would increase service levels with additional strings and bump capacity by 11%, according to an Alphaliner analysis.

Other deployment changes would be less confrontational. On Asia - Europe, 2M would reduce one string but hold capacity even with larger ships. On the transpacific, the two-company VSA would actually offer less capacity than the current tripartite agreement with CMA CGM, but network coverage would remain the same.

Transatlantic trade coverage would remain constant, modeled after the existing MSC deployment plus the addition of Algeciras, a Maersk connecting hub in the Med. Transatlantic services to Canada would be operated separately outside the scope of 2M.

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