On the left, Drewry’s World Container Index (WCI) has tumbled by 80% year-on-year, down to $2000/FEW. On the right, one sees the industry’s unprecedented, all-time-high, orderbook with deliveries coming on stream this and the next two years (with many thanks to Drewry Shipping Consultants Ltd and Alphaliner). If you look at the two graphs together, ‘one plus one makes two’, and rates are expected to fall even further going forward.
MSC’s orderbook in particular is spectacular, five times that of the more conservative Maersk Line. This explains their ‘divorce’: Maersk has decided to invest along the supply chain while Mr. Aponte (MSC) will continue doing what he, and his father before him, did best: “shipping”. In other words, the two companies decided to invest their fathomless profits of the COVID-19 years in what each was best at: Door-to-door supply chain integration for Maersk; competitive ‘port-to-port shipping’ for MSC. The two strategies are not compatible, as they lead to two different cost structures: substantial investments in a global network of sales effort around the world, for Maersk, targeting the individual shipper, and ocean transport cost competitiveness for MSC, renowned over the years for its acquisition of new and secondhand tonnage at competitive prices.
My point here is different, though: The two graphs tell us that shipping alliances may have not been very successful, after all, in managing capacity, and regulators may be proven right in considering the (COVID19) price hikes just a “matter of demand and supply”. This could be the second reason for the Maersk-MSC divorce. Or not?
MSC’s orderbook in particular is spectacular, five times that of the more conservative Maersk Line. This explains their ‘divorce’: Maersk has decided to invest along the supply chain while Mr. Aponte (MSC) will continue doing what he, and his father before him, did best: “shipping”. In other words, the two companies decided to invest their fathomless profits of the COVID-19 years in what each was best at: Door-to-door supply chain integration for Maersk; competitive ‘port-to-port shipping’ for MSC. The two strategies are not compatible, as they lead to two different cost structures: substantial investments in a global network of sales effort around the world, for Maersk, targeting the individual shipper, and ocean transport cost competitiveness for MSC, renowned over the years for its acquisition of new and secondhand tonnage at competitive prices.
My point here is different, though: The two graphs tell us that shipping alliances may have not been very successful, after all, in managing capacity, and regulators may be proven right in considering the (COVID19) price hikes just a “matter of demand and supply”. This could be the second reason for the Maersk-MSC divorce. Or not?
HH
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