The first quarter of 2015 saw a massive number of ships hitting the water as part of the new adjusted 2M alliance network that was launched by the world's two largest container carriers, Maersk Line and MSC, at the beginning of the year.
As such, Maersk Line has refrained from speculating publicly if the collaboration would result in the gains that the carrier signaled to the financial market - and not least the carrier's shareholders - almost a year ago.
Now, more than seven months of 2015 have passed, and the Danish carrier is in the process of collecting data to determine whether the gains from increased efficiency will reach the projected USD 350 million a year. This is not a matter of simple math, as the equation involves various parameters that need to be added or subtracted. For instance, the sliding oil price, and thus cheaper bunker, needs to be subtracted, as the interesting aspect concerns the effect of a larger route network and the ability to use slots on each other's vessels.
USD 350 million
Maersk Line expects to present the final review when the carrier, as one of the Maersk Group's core business units, takes the stage on the upcoming Maersk Capital Markets Day in Copenhagen on September 9th. But at this point there are already numerous things indicating that the carrier will reach its set target for the 2M cost reduction gains. In any case, Maersk Line CEO Søren Skou tells ShippingWatch that he is confident about achieving the full projected gains from the MSC collaboration.
"The first quarter this year was very much focused on implementing 2M, and we had many balls in the air. In the second quarter we were better able to understand the effect, and to ask the question of whether we've delivered in terms of the USD 350 million. We're still doing the math, but my impression is that we've achieved the savings we aimed for," says Søren Skou.
The gains from increased efficiency has been the key argument for the many major container carriers who have joined forces in the four large-scale alliances in recent years. Furthermore, the same argument has been the reason why first US maritime authorities and later Chinese authorities decided to allow carriers representing more than 90 percent of all seaborne container trade to work closely together and share slots on each other's vessels. The efficiencies would be positive for the economy as well as for the environment, they reasoned.
The benefits of the 2M alliance are thus also starting to appear on the books, with the small addition that one party, MSC, never publishes its results and accounting figures, as the carrier is 100 percent owned by Italy's Aponte family. But even though Maersk Line's interim report, published last week, did not make it explicitly clear, the savings achieved through 2M are reflected in the result as improved operations. The second quarter interim report, also representing the first half of 2015, came as a positive surprise to virtually all analysts, clocking in at a profit of close to USD 500 million.
Beyond the fact that 2M consists of two carriers who differ greatly - both in terms of transparency and general corporate culture - one key point that has been discussed as constituting a challenge concerns the two companies' widely different ability to deliver containers on time, so-called schedule reliability.
The latest figures from SeaIntel showed MSC with a bottom ranking, and Maersk Line near the top. But Søren Skou explains that these numbers do not show how the two carriers are performing on their key trade, Asia-Europe, as the SeaIntel figures cover the carriers' global schedule reliability.
"In terms of relliability we have an agreement of being in the first quarter, and we have achieved this today," Søren Skou tells ShippingWatch.
Misread the market
In addition to the first quarter being characterized by the launch of the new collaboration, the first three months were also a period in which Maersk Line quite simply misread how much the market was willing to pay for container transport. This meant that the carrier lost 1.6 percent of the market. Since then, in the second quarter, the carrier has fought back big-time and reclaimed a whopping 13 percent of the market, and the carrier even pulled this off at a time when the key Asia-Europe trade noted a five percent setback.
"We must say that we misread the market at the beginning of the year, or to put it in another way: we had become too expensive. We set a price point, where we assess the market on the basis of capacity and demand, and here we missed the target, and we lost market shares because of this. This meant that we entered the price competition too late," Maersk Line CEO Søren Skou told ShippingWatch on Friday.