Subscribe to our free, weekly email newsletter!


Two largest ocean cargo carriers form 2M Network

By Patrick Burnson, Executive Editor
July 10, 2014

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.

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

While many industry analysts contend that distribution centers near U.S. East Coast ports will see a surge of new business after the Panama Canal expansion, real estate experts say this phenomena is already underway.

A new Government Accountability Office report on the effects of changes to truck driver hours of service rules has sparked a war of words between the American Trucking Associations and Federal Motor Carrier Safety Administration, the arm of the Transportation Department that is in charge of making those rules.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement partners Canada and Mexico in May dropped 10.8 percent annually to $92.7 billion, following a 6.8 percent annual decline to $93.3 billion in April.

Carloads headed down 2.5 percent annually to 286,660, and intermodal containers and trailers remained on a growth path, up 2.3 percent to 270,952.

Rumors of transportation and logistics titan UPS acquiring Chicago-based transportation management services provider Coyote Logistics for $1.8 billion have become a reality, with UPS announcing today that the deal is now official.

Article Topics

News · Ocean Cargo · Container · Shipping · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA