MSC-CMA CGM form alliance

   Mediterranean Shipping Co. and CMA CGM, the second and third largest container lines in the world, on Thursday announced an operational alliance spanning a number of global trades.
   The alliance will see the two carriers partner on the Asia-Northern Europe, Asia-Southern Africa, and South America trades.
   “The agreement, which is designed to improve the two partners’ respective performance, will help to drive extensive operating synergies and enhance quality of service for all of their customers,” the two lines said in a statement. “On a certain number of trades, the partnership will also enable the groups to deploy the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailings.”
   Geneva-based MSC and Marseille-based CMA CGM have grown consistently in the last few decades to become larger, in terms of fleet capacity and global network, than all but Maersk Line, the liner industry’s bigger single operator. They’ve taken slightly different paths, with MSC growing organically and eschewing acquisitions and alliances, while CMA CGM has grown on the strength of strategic acquisitions of niche operators in several regions.
   Both lines, however, are similar in that they are family-owned and not publicly traded.
   “We are very happy to have signed this broad-based partnership, which will unite our two family-owned companies in the years ahead,” said Diego Aponte, vice president of MSC. “The agreement offers us new opportunities to optimize the use of our respective fleets, improve our transit times and increase our performance.”
   The two lines already participate in a vessel sharing agreement (VSA) with Maersk on the transpacific trade.
   “For more than 30 years, our two companies have followed the same trajectory and for a number of years we’ve cooperated on a few lines,” said Rodolphe Saadé, executive officer of the CMA CGM Group. “Based on this experience and our shared vision of the shipping industry, we have decided to step up our partnerships, which reflect a commitment to long-term cooperation and will enable us to offer customers improved solutions and services.”
   According to American Shipper affiliate ComPair Data, MSC currently operates two services between Asia and Northern Europe, while CMA CGM offers space on eight services (four through slot charters, and four through services it wholly or partly operates) with 12 different service partners, none of which are MSC.
   “It might have been motivated as a response to Daily Maersk,” said Simon Heaney, of London-based maritime consultant Drewry. “Both MSC and CMA CGM operate exclusively big 10,000 TEU-plus ships in Asia-Europe and in MSC’s case would not have to unpick any existing VSA. It might also give them the opportunity to shed some capacity from Asia-Europe, although where either will cascade the big ships to is another question.
   “I suspect that we will see a lot more partnerships and alliance reshuffling over the next few months as carriers decide how they can be cost competitive in Asia-Europe. I also think there will be a few planning exit strategies as they realize the rewards, or losses, are not worth the effort and expense.”
   Peter Keller, a Vermont-based consultant and former president of NYK Line (Americas) said that the announcement was “a natural consequence of Daily Maersk, which when Maersk announced many in the industry saw as an absolute game changer and would lead to more and deeper partnerships to compete on that important trade lane. It was a major initiative that people had to respond to if they are going to be competitive.”
   Keller, in a speech last year, suggested that there needed to be a major change in how ships are owned and operated.
   “It is a consequence of what you have to do, because we know that the alliances are difficult to manage and carriers need to go to deeper partnerships,” he said. “I think it is good for the industry.”
   He said he expected other carriers to form closer relationships in order to be able to compete more effectively. How those companies will come together, he said, will be a matter of “personalities and other relationships.”
   Keller explained that alliances are complicated to manage because in most cases the ships are still managed by the individual companies. Though he noted in the case of the Grand Alliance, of which NYK was a member, there is a central organization that manages the ships.
   As a result he said that if carriers are going to compete with something like Daily Maersk, “you are going to have to pool your ships and move to a deeper type of operating relationship as opposed to what the alliances do, which is meet monthly, or meet quarterly, have various levels of accountability and it just takes for ever. If something happens in the market that you have to react quickly, the alliances are fairly extensive organizations, and as with many organizations like that change is slow – you have to go through committee processes and everything else.”
   “I would imagine this partnership between Aponte and Saadé will allow for better management so the companies can react more quickly and be more competitive.”