An alliance between shipping giants Maersk and MSC will end in two years. Photo / Supplied
Freight sector players hope shipping line competition for New Zealand import and export customers could crank up from 2025 with the end of an alliance between giants Maersk and MSC.
The shipping companies recently announced that because so much had changed since they signed a 10 year alliance in 2015, they would discontinue their “2M” agreement and pursue their individual business strategies.
The alliance aimed to ensure “competitive and cost-efficient operations” on the TransPacific, Asia-Europe and TransAtlantic trade routes, the companies said.
New Zealand Customs and Freight Forwarders’ Federation (CBAFF) president Rachel Madden said as the two companies will want to keep their TEU (twenty foot equivalent containers) at the same volumes after the alliance ends, she doesn’t foresee any significant impact for New Zealand importers and exporters.
“What will be more interesting is the impact vertical integration has to New Zealand shippers. With more shipping lines investing in vertical integration this is likely to have the greater impact.”
Vertical integration is the business structure in which a shipping company controls different stages along the supply chain. Instead of relying on external suppliers, a company seeks to bring processes in-house. The trend intensified with the pandemic, with shipping lines buying air freight and logistics operations, freight forwarding operations and warehousing.
An example is Maersk’s launch of a New Zealand coastal shipping service, and its development of a “state of the art” cold chain facility at the new Ruakura Superhub in Hamilton.
Maersk’s head of Oceania Export Market, My Therese Blank, said for New Zealand customers the announcement of the end of the alliance would have no short-term impact.
“The 2M alliance remains in place for another two years which will give us time to redesign our network based on our customers’ demand projections for 2025 and beyond,” she said.
“As the 2M network covers Asia-Europe, TransPacific and Transatlantic trade routes, our New Zealand ocean products to Asia, Europe and Mediterranean that are trans-shipping via our South East Asia hub ports will be changed in 2025 to improve supply chain connectivity.”
But immediate past CBAFF president and freight forwarding company owner Chris Edwards predicts a long-term effect of the end of the alliance.
Shipping strategy shake-up
In a recent newsletter to his clients, he said both shipping companies had referenced differing strategies in recent publicity and these will affect how shipping works in New Zealand.
“Issues on the horizon include environmental changes to propulsion, rumoured hub and spoke models being discussed and whether both stay out on their own or join other shipping companies in new alliances.
He said competitive tension must return to the shipping industry, citing recent anti-trust discussions in the US, and the split between the two companies, along with falling volumes, was sure to boost competition.
Edwards noted the starkly different business approaches of MSC and Maersk in the past two years.
“While MSC has spent this period buying and building up tonnage - more slots and ships - Maersk have preferred to invest landside by buying up freight forwarding companies and focusing on infrastructure.”
Maersk’s Blank told the Herald that “by significantly increasing the control of our network, our network can better deliver on our customer promise”.
Edwards said Geneva-based MSC was the world’s largest shipping line but tended to be less visible, to the public at least, in New Zealand than Maersk.
Maersk has a relationship with the country’s largest freight manager Kotahi, itself an alliance between dairy giant Fonterra and meat exporter Silver Fern Farms.
“However in certain markets, notably Nelson and Bluff, they (MSC) are well respected by exporters for servicing ports that others have pulled out of,” Edwards said.
“Given their sheer size they could have a significant impact on competition here in New Zealand should that be part of the strategy, but for now many remember them for slower transits and significant delays in Singapore during the height of the pandemic.
“They do have excellent links to New Zealand however and have been here since 1989, over 30 years.”
Edwards said there were alternative independent carriers operating in New Zealand.
“TS Lines, Focus Lines and ZIM (the latter once part of 2M) all aspire to remain part of the shipping scene here, although once again, strategy and market conditions will have the final say.
“While the likes of Maersk have focused on contract rates with big players, many of the independent carriers have gone down the ‘spot rate’ route which is very profitable when times are good, but sees returns fall sharply when times are bad,” he added.
“This can be mitigated perhaps by choosing to support markets that others don’t - TS LIne’s direct call to Wellington as an example - but if volumes continue to decline it is hard to see all three carriers being here by Christmas (2023) in our view - something will have to give.
This was especially true if competition from the bigger carriers with war chests full of cash from the past two years intensified, he added.
“However for many small and medium importers and exporters, these independent lines have given vital support when the larger carriers could, or would, not, and it would be a shame to see them go and reduce options.”
Edwards said if there was one thing the New Zealand supply chain learned in the past two years it was that local offices of large shipping lines have little say or influence over decisions made offshore.
“Some say we should be grateful for the services we do have given our location, but that tends to be an unpopular message with clients who saw their loyalty to certain shipping lines go unrewarded during the past two years’ disruption.”
Meanwhile, Edwards and Madden said they were saddened by Maersk’s recent announcement of the end of the 151-year-old Hamburg Süd brand, acquired by Maersk in 2017.
Madden did not believe the end of the brand would mean any more changes than already experienced, but as she had started her career with the brand she was sad to see the name disappear.
Edwards said for many New Zealand shippers the name was “synonymous with good local management and a more nostalgic time when a personal relationship was still important in the ocean supply chain”.
The change may add $25m annually to costs during a cost-of-living crisis.