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Smedegaard: 2M will strengthen Maersk Line result this year

The worlds' largest container alliance 2M, with Maersk Line and MSC, has been well received by customers and will contribute to a positive annual result for 2015, says Maersk Group CEO Nils Smedegaard.

Photo: Maersk Group

The 2M alliance, between the world's two largest container carriers Maersk Line and MSC, has been well received by customers - shippers from around the world - says Maersk Group CEO Nils Smedegaard in comments on the group's annual report for 2014.

The total profit from the group was the largest in Maersk history, at a USD 5.2 billion net result, although more than half of this comes from the sale of retail group Dansk Supermarked, which contributed US 2.8 billion to the combined result.

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The largest business component, Maersk Line, was once again the star, as the carrier achieved a profit of USD 2.3 billion compared to a profit of USD 1.5 billion in the previous year.

Well received

Maersk and MSC launched their cooperation in the 2M alliance at the beginning of the year. The 2M alliance is a Vessel Sharing Agreement in which the two carriers offer each other room on their respective vessels, as well as launching a whole new network. According to Nils Smedegaard, the reaction from shippers has been good, though the carrier cannot yet put exact numbers on the effect of the alliance until after the interim report for the first quarter. But he has no doubts that 2M will contribute positively to Maersk Line's bottom line. The container carrier expects an underlying result in 2015 bigger than last year's USD 2.2 billion.

2M creates new service between Gothenburg and Japan 

"It is our understanding that 2M has been well received by customers, and that the alliance will contribute positively to the 2015 result," says Nils Smedegaard and points to the increased efficiencies that form the motivational basis of the alliance.

But 2M is far from the only big alliance fighting to transport the customers' containers. The global container market is currently divided between four big alliances, all of which are launching new initiatives and services in the fight to be the customers' top choice.

The Maersk Group made USD 5.2 billion profit in 2014  

Most recently, the major Asian CKYHE alliance announced plans to increase its presence on the main services from Asia to Europe in April, with a comprehensive reorganization of sailing plans and port calls. This will, according to SeaIntel, especially impact the Asia-Adriatic Sea trade. Accounting for 40 percent of the Maersk Group's activities, the results at the carrier have a significant impact on the group as whole - and as such, it was a pleased Nils Smedegaard who could announce that Maersk Line is the "absolute largest contributor" to the group result, which was otherwise pulled down by oil the price, a development resulting in big impairments for Maersk Oil.

Divestment in place

But the low oil price did not affect the group's result significantly, says to Nils Smedegaard, explaining that a several-year process of divesting of secondary activities is approaching its goal with the sale of Danske Bank to A.P. Møller Holding - and that the Maersk Group is now a conglomerate with activities that all relate to shipping, transport and oil.

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Nils Smedegaard declines to elaborate on how much the low oil price will benefit shippers through the so-called BAF surcharge. He expects an oil price of less than USD 100 per barrel for a number of years to come, but he limits his comments to the fact that lower costs historically benefit customers. But there is no doubt that the many customers - whom Maersk Line CEO Søren Skou will meet at the large TPM conference next week in Long Beach, California - will use the low oil price for an attempt to negotiate lower rates.

The Maersk Group expects that the global need for maritime transport will grow by three to five percent this year. The line carrier will, as the Group has traditionally stated, bet on growing with the market.

EU keeps on eye on alliances

The de facto division of the container market between the four big alliances has caused the shippers' European organization to warn against the development. The shippers demand tightened control of the container carriers in the wake of 2M, a collaboration that was subsequently followed by the container alliance Ocean Three, compiled by CMA CGM, UASC and CSCL. Ocean Three has since then formed a cooperation agreement with Chinese Cosco.

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The latest addition is a new cooperation between Hamburg Süd and CMA CGM, which, as mentioned above, is part of Ocean Three.

In a recent interview, the EU's new Commissioner for Competition, Margrethe Vestager, told ShippingWatch that she will keep a close eye on the new mega-alliances in the container industry.

"The Commission will continue to monitor developments in the container industry and will scrutinize every concern relating to interference with competition that the Commission discovers on its own or which is reported. It goes without saying that the Commission is in frequent contact with players - carriers, customers, ports, etc., - and I'm sure that they won't hesitate to notify us about cases that interfere with competition which they feel need to be investigated further," she says.

The alliances' roles in the 2015 container drama

SeaIntel: CKYHE to increase competition on the Adriatic

The Maersk Group made USD 5.2 billion profit in 2014

Shippers sharpen the tone regarding container alliances

EU will keep a close eye on Maersk Line and MSC  

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