Over the next financial year, container companies are expected to earn about 5% of their 2022/23 profits due to the market downfall, most of them are also postponing a substantial chunk of their current orderbook. Even if the majority of the top 10 container carriers seem to be able to close the year with positive financial results, the actual freight market still sheds some shadows on their future.
Monster freights and congestions are gone, while the schedule reliability is finally stable. The container world seems to be back to normal, except for the huge profits made in the last two years, and an alliance that fell short. These two factors, however, will strongly affect the future of the market. Were the carriers wise enough to efficiently invest their tremendous profits? And how are the alliances going to settle in the future? These are the main pain points that will affect the market in the upcoming years. Just considering the actual agreements, we can instantly realize the complexity of future scenarios.
The divorce between the top two container carriers MSC and Maersk (2M alliance) wasn’t a bolt from the blue. MSC’s aggressive strategy over the past two years was a clue and many experts were predicting this break-up. As reported by both Soren Toft and Vincent Clerc – MSC and Maersk CEOs – “much had changed” since the creation of the ten-year 2M alliance in 2015. Now both companies will follow different strategies, and all the competitors are eager to know their decisions. This will probably lead to a disruption of the container alliances, starting a domino effect.
Meanwhile, the remaining alliances (The Alliance and Ocean Alliance) could gain some market share by exploiting the market instability; on the other hand, all strategies might be turned on their heads, mainly in terms of vessel orderbook. A future disruption of the alliances could also mean higher competitiveness and a consequent price war that will weaken them even further.
Most of the agreements reshaping will be also based on the current medium/long-term strategies. Most carriers aimed to reinforce their fleet, while others tried to lower costs or focus on vertical integration. A good example was the partial acquisition of Atlas Corp. (Seaspan Holding) by Ocean Network Express, which now controls about 27% of the biggest company in containership management and ownership.
Alliances still play a vital role during a bearish freight market, and it is hard to imagine such an industry without these agreements. In any case, we will need to wait for the breakup of the remaining alliances (Ocean Alliance in 2027, and The Alliance in 2030) to have a clearer idea of the new container agreements map.