Maersk, MSC enter 10-year VSA
On the heels of the decision last month by China to reject the plan by the world's three largest liner carriers to form the P3 Network, two of the three — Maersk Line and Mediterranean Shipping Co. — have agreed to enter a 10-year vessel-sharing agreement (VSA) on the Asia-Europe, Transatlantic and Transpacific trades.
CMA CGM, the other proposed partner in the P3, will not be a part of the new agreement.
MSC said that the VSA, which the carriers are calling called 2M, replaces all existing VSAs and slot purchase agreements that the Maersk and MSC had with each other in these trades. The VSA is expected to start in early 2015, based on approvals from relevant government regulators.
2M will include 185 vessels, with an estimated capacity of 2.1 million TEUs, deployed on 21 strings.
“The overall purpose of the cooperation is to share infrastructure (network),” Maersk said in a statement. It added that the two carriers “will be able to provide their customers with more stable and frequent services — cover more ports with direct services.” In addition, Maersk said the VSA will improve the efficiency of both carriers’ networks through better use of vessel capacity and economies of scale.
“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,” said Søren Skou, Maersk Line’s chief executive officer, in a statement Wednesday morning.
Diego Aponte, MSC’s vice president, said the deal “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.”
Aponte continued, “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."
Maersk explained the 2M VSA differs from the earlier proposed P3 Alliance in two ways — namely, the combined market share is much smaller, and secondly, it’s a “pure” VSA. “There will be no jointly owned independent entity with executional powers,” the carrier said.
The 21 strings of 2M are split as follows: Asia/North Europe, 6; Asia/Mediterranean, 4; Asia/U.S. West Coast, 4; Asia/U.S. East Coast, 2; North Europe/United States, 3; and Mediterranean/United States, 2.
Maersk Line will contribute about 110 vessels, with a nominal capacity of 1.2 million TEUs, or 55 percent of the total capacity, while MSC will contribute about 75 vessels, with a nominal capacity of 0.9 million TEUs, or 45 percent of the total capacity. Vessels deployed in the VSA will continue to be owned (or chartered) and operated by the two individual lines, the carriers said.
In an important difference from the P3, Maersk said the new 2M VSA “does not include joint marine operations. Each party will, thus, execute their own operations including stowage, voyage planning and port operations.”
When the Chinese rejected the P3 Network, they pointed to the plan by the three carriers to create a joint operations center as an essential difference from other vessel sharing agreements.
Maersk, said it will not have any additional commercial tasks or responsibilities. “Each party will continue to have fully independent sales, pricing, marketing, and customer service functions,” the carrier said.
A joint coordination committee, however, will monitor the network on a daily basis.
Lars Jensen, chief executive officer and partner at SeaIntel Maritime Analysis, said he was not surprised at the news, having predicted after the Chinese rejection that there would be other VSAs instead. He said he was convinced the two carriers would be allowed to move forward with their plan, but he added “that is what I thought about the P3 as well.”
Jensen said the Chinese saw the P3 as a de-facto merger and a deal that would have given the three carriers a lot of market power. By “throwing CMA CGM overboard” and not having a joint operations center, he said the new agreement is “no different from any other VSA in the world. It would be extremely odd if they are not allowed to go ahead with that one.”
Dirk Visser, senior shipping consultant and managing editor at Dynamar, said a major challenge will be marrying two carriers with very different reputations for schedule reliability. Maersk has consistently obtained top scores, with MSC getting low scores.
“How you can keep that in hand without a joint operation center as they had in mind for P3 is difficult to see,” he said. “I expect fairly tough agreements will have been made in how to control that. Maersk will not be able to get any Daily Maersk operations by MSC vessels if they are not of the same service integrity as they operate with their own service.”