Mục ý kiến chuyên gia Significance and Impact of Dissolution of 2M Alliance

2M Announced End of Alliance in 2025 Currently, the largest suppliers in the container shipping market are the three major shipping alliances, comprising of the world’s top nine liner operators. The three shipping alliances are 2M (MSC, Maersk), Ocean Alliance (CMA CGM, COSCO, Evergreen) and THE Alliance (Hapag-Lloyd, ONE, HMM, Yang Ming), and have the largest impact on the shipping market controlling more than 83% of the entire container ships (as of January 2023). The three shipping alliances that have remained since HMM joined THE Alliance in 2020 are likely to change, as MSC and Maersk announced that they will terminate the 2M in January 2025.

Container shipping companies can enjoy the following benefits by joining shipping alliance:

1) Enhance quality of service
By partnering with other carriers, container shipping companies can expand the scope of service and increase the number of operation. For example, a shipping company having 12 containers may be able to provide Asia-Europe services only once a week on its own, but when joining hands with three other companies each having 12 containers, they can provide services three times a week.

2) Reduce cost by achieving economies of scale
Container shipping companies can reduce costs by sharing port terminal and inland logistics network. They can share information on inland logistics through alliance and obtain greater bargaining power by jointly using port terminal, which will further lower costs.

3) Distribute risks
Through the alliance, companies can secure fleets required to maintain regular services and reduce risks by sharing and exchanging freight space. Furthermore, they can minimize the deployment of fleets when entering new market, as well as reduce possible risks by sharing and exchanging freight space based on economies of scope. Possible Causes Behind Dissolution of 2M Alliance There may be various reasons behind the dissolution of 2M, which can largely be divided into the following three reasons:

First, there is a disagreement between MSC and Maersk in terms of future vision. In 2018, Maersk announced a corporate plan called ‘Stay Ahead’ to expand its business into the logistics market. In line with this, the company is seeking transition from shipping company to comprehensive logistics company by acquiring logistics businesses including customs clearance and warehouse. On the other hand, despite its movement such as acquiring logistics business and advancing into the air cargo market since 2021, MSC has always put focus on the shipping industry. As such, the differing view of the two companies on the container shipping industry could become a barrier in their long-term cooperation.

Second, both companies face the burden of monopoly regulations currently being or to be imposed. The dissolution of 2M can be seen as a response to the monopoly laws of the Federal Maritime Commission (FMC) and the European Commission (EC). MSC and Maersk currently take over 34% of the entire market share, and if including their orderbook, the number is expected to reach 40% in 2025; therefore, the companies can be subject to sanctions for their market dominant position. Due to the impact on the container supply chain in 2021, the FMC has tightened regulations on the shipping alliances, and the EC plans to re-review and announce CBER (Consortia Block Exemption Regulation) in 2024 – the EU legal framework which exempts liner shipping consortia from EU antitrust rules.

Third, the relationship between MSC and Maersk is not as solid as that of other alliances. Ocean Alliance and THE Alliance all have ‘Alliance’ in their official name, whereas the official name of 2M is ‘2M VSA’. VSA refers to Vessel Sharing Agreement and represents a lower level of cooperation compared to alliance. MSC and Maersk only deploys 24% and 39% of respective fleets for joint operation, which is lower compared to the carriers joining other two alliances. Furthermore, although there is a passive sharing of freight space between MSC and Maersk, the companies have not been shared freight space in practice except for Asia-North America, Asia-Europe and North America-Europe routes.

What seems clear is that neither Maersk nor MSC has rushed to make a decision to end the alliance. Apart from Maersk’s transition to comprehensive logistics business in 2018, MSC secured the industry’s No. 1 position by increasing the number of fleets that can provide independent services in order to focus on the shipping industry. After it declared the COVID-19 pandemic in 2020, MSC has either purchased or signed charter contracts for 284 used ships with more than 1 million TEU and is currently operating over 715 ships with more than 4.6 million TEU as of February 2023.

When the 2M alliance was launched in January 2015, its fleet capacity was about 5.43 million TEU and the current fleet capacity of THE Alliance stands at 4.84 million TEU. Although it may differ depending on the scope of service, in light of the past cases it is likely that a company can open services globally if its fleet capacity reaches 4 to 5 million TEU. As MSC’s orderbook exceeded 1.7 million TEU in 2023, its fleet capacity is expected to reach 6 million TEU in 2025.

Possible Scenarios Following Termination of 2M: Independent Service vs. Reorganization of Alliance Since the alliance between MSC and Maersk will be maintained until January 2025, no significant change is expected in the short term. The problem is what will happen next, and the possible scenarios are illustrated below.

Firstly, MSC is likely to overcome its weakness by building an independent system for ocean routes after 2025 and forming strategic alliances with small and medium-sized shipping companies to provide certain services. Furthermore, since MSC is currently working on expanding its fleets, there will be preparations for vessels that may be insufficient in the future. However, MSC is likely to be affected by carbon emission regulations of the International Maritime Organization (IMO) due to high proportion of vessels ordered before the regulations for Energy Efficiency Design Index (EEDI) for Ships were placed among the vessels sold as used ships from 2020. In addition, MSC reportedly emitted about 10.72 million tons of CO2 in 2019, becoming the 7th largest emitter in the EU.

Maersk can choose independent route like MSC, but much of its remaining orders are methanol propulsion ships that focus on replacing the existing fleets to eco-friendly model to achieve carbon neutrality, rather than expanding fleets. As of February 2023, 19 methanol propulsion ships were ordered, and negotiations for new orders for an additional 8 ships are underway. If Maersk builds an independent service, the scope of service may be reduced which can negatively affect the market share. Therefore, Maersk is highly likely to maintain or expand its current scope of service by partnering with other shipping companies after 2025. Below are some possible scenarios that are currently being discussed about Maersk’s future movement:

The first scenario is Maersk forming a coalition with medium and large shipping companies that have not been incorporated into three major alliances such as ZIM. In particular, ZIM has unique strength in the Asia-North America route and can complement Maersk as it has low market share in Europe. In fact, 2M and ZIM formed a cooperative relationship through strategic alliance in the past. ZIM’s large-scale order of LNG propulsion ships since the COVID-19 pandemic is in line with Maersk’s strategy to build eco-friendly fleets, hinting at the two companies’ high possibility of a coalition.

The second scenario is Maersk joining THE Alliance. Maersk is unlikely to join the Ocean Alliance, since doing so will increase the company’s market share to over 40% which could be subject to regulation. If Maersk joins THE Alliance, it will have the largest fleet operation in the world; however, with its market share being close to 35%, there is still a possibility that the alliance will be subject to monopoly regulations by relevant authorities. Moreover, the existing members may oppose to Maersk joining the Alliance since the percentage of their fleet deployment is higher than that of other alliances, meaning there could be significant overlapping of service if Maersk were to the alliance. In addition, THE Alliance expires in March 2030 and an additional membership requires consent of its members. If Maersk decides to join the alliance, there is an advantage of having access to the company’s know-how on fuel supply chain, etc. as it takes a preemptive approach on eco-friendly fleets.

The last scenario is Maersk forming a coalition with CMA CGM. Maersk, MSC, CMA CGM attempted to launch ‘P3 Network’ back in 2014, but the attempt failed as they did not get approval from the government authorities. The fact that the promotion strategy of CMA CGM is similar to Maersk, both pursuing comprehensive logistics business and expansion of eco-friendly fleets, will likely be considered as a positive factor in the relationship of two companies. However, it may be difficult for CMA CGM to withdraw the Ocean Alliance as the alliance will continue until 2027. If CMA CGM terminates the Ocean Alliance, it will certainly affect other remaining alliances.

Reorganization of Alliance Likely to Ease Market Concentration As of January 2023, the Herfindahl-Hirschman Index (HHI) for the top 10 shipping companies was calculated as 1,014, indicating a highly competitive market (the market is competitive if HHI ≤ 1,500). However, when calculating the HHI by alliance, the market concentration recorded 2,433 which was close to 2,500 – the standard for determining the oligopoly market.

If MSC and Maersk go on separate ways with the dissolution of 2M in 2025, the concentration level of the container shipping market will likely be eased. The market concentration level will be the lowest if Maersk forms an alliance with CMA CGM and will remain similar to pre-dissolution level if Maersk joins THE Alliance. Lower market concentration means a competitive market will be formed, which will likely intensify competition among carriers and alliances. However, considering that shipping companies carry out independent sales activities independently while engaging in joint activities such as sharing freight space, it would be difficult to conclude that low market concentration will lead to fierce fare competition. Nevertheless, if the market concentration is eased, supply control activities such as blank sailing of alliance fleets that occurred after the pandemic will likely lose effectiveness, which will cause a drop in fares.

An Era Where Strategy Pursued by Shipping Companies Matters More

The recent breakup of the 2M alliance is different from the previous reorganization of alliances by its nature. Previously, shipping companies repeatedly dissolved and joined alliances driven by their business interests; however, the dissolution of 2M was based on complex reasons such as companies’ different long-term strategies and preemptive response to regulations. In other words, companies started to put more emphasis on operating eco-friendly fleets and reset future directions rather than increasing their market share and improving profits. This change in market trend has significant implications for Korean shipping companies as well. Four Korean companies are currently included in the world’s top 30 container shipping companies, and cooperation between Korean companies is underway in the Korea-Japan and Korea-China routes. Therefore, Korean companies need to come up with measures to share their long-term strategy.

As shipping companies seek to improve efficiency along with the IMO’s carbon emission regulations, the shipping industry has entered the era of ‘2D’ (Decarbonization & Digital transformation). It is now time for market players to reconsider their strategies to enhance competitiveness in this evolving market.

# References [1] Alphaliner(2023), monthly monitor, no.1, p.1-43
[2] Alphaliner(2015), monthly monitor, no.1, p.1-41
[3] Alphaliner(2023), weekly newsletter, no.5, p.1-19.
[4] KMI(2022), Study on Strategies of the Container Shipping Industry in the Post-Corona Era
[5] Transport and environment report(op.europa.eu/)

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