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How to stop the commoditization of container shipping

Mancan’t feel if Ocean Freight Center, Mediterranean Shipping Company, is the biggest ocean carrier you’ve never heard of. That’s the way it is. Its founder, Gianluigi Aponte, is an anonymous Italian billionaire based in Switzerland, a country with no maritime borders and a culture of secrecy as deep as the sea. His company has quietly taken over the sailing world. Born in 1970 in the one-ship trade between Somalia and Southern Italy, MSC It overtook AP Moller-Maersk last year to become the world’s largest container shipping company. Yet its culture of silence persists.when it’s CEO, Soren Toft, revealed little when he spoke at a shipping conference in Long Beach this month. “We will not let [talking in public] A habit,” he said gruffly.

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Don’t be put off. Actions speak louder than words. Ocean Freight Center And not simply surpassing Maersk. It has left it. According to Alexia Dogani of Barclays, when it takes delivery of ships on order, their gross tonnage may be 40% higher than that of its Danish rivals. Meanwhile, Maersk, an industry giant dating back to 1904, is abandoning its quest for supremacy on the high seas. It wants to focus its investments on high-return services along the supply chain from ports to rail, road and air networks, rather than bulk orders and, in the jargon, become an integrator rather than just a container carrier.

In fact, the No. 1 and No. 2 companies in their industries at the World Trade Center are betting very differently on the future. They are doing so against the backdrop of a post-pandemic slowdown in container shipping and long-term questions about the future of globalization. Whether successful or not, they provide an interesting natural experiment for different approaches to industrial commercialization.

It was a remarkable parting of ways. For eight years, the two companies have been in an alliance known as 2rice, in which, like airlines swap passengers in a code-share agreement, they offer container space on each other’s ships. They are always weird. Imagine a budget airline like Ryanair teaming up with a luxury airline like Singapore Airlines and you get the idea. Ocean Freight Center is notoriously unreliable (its initials, an old joke, stand for “Maybe the ship is coming”). Its staffing levels, as one former Maersk employee puts it, are “starving to death”. Maersk is the opposite. It is the most punctual, best-staffed and most attentive airline in the industry. But in the mid-2010s, it overordered its supersized ships and needed help filling them. Ocean Freight Center, whose main selling point is cost, is happy to be obliged to emulate Maersk’s service standards. It worked so well that the league began to be seen as a cornerstone of improving financial discipline in the industry.on a sign Ocean Freight CenterIn 2020, Mr. Tofter jumped ship from the Danish company, where he had been chief operating officer.

However, there are also disadvantages. As Alan Murphy of research firm Sea Intelligence puts it, alliances are “the fast track to commoditization.” Once you entrust your cargo to someone else’s ship, it’s hard to stand out. Also, since the two companies have different strategies, the alliance doesn’t make much sense. Ocean Freight Center Taking advantage of the boom times during the covid-19 pandemic ordered enough ships to go it alone. As Maersk focuses on logistics, it needs full control over its cargo, which is easier if they are on its own ships. In late January, the companies said they would end their alliance and part ways in 2025.

Their different tactics were bold – almost to the point of recklessness. MSC’The frantic buying will lead to severe overcapacity in the market this year, driving down freight rates. The assumption is that it hopes its overwhelming size will enable economies of scale, lower unit costs and further expand its market share, which is around 17% by volume. This is a classic approach for a market leader in a cyclical, investment-intensive industry that believes it can outperform its competitors. The problem is that smaller shipping lines are also using the pandemic windfall to buy new ships.size can also mean Ocean Freight Center‘Our standards are slipping,’ said Simon Heaney of Drewry, a shipping consultancy.He noted that regulator the Australian Maritime Safety Authority said last month it had detained five Ocean Freight Center Already this year many ships are due to substandard maintenance practices.

Maersk has a different problem.However sensible it may be to maintain a disciplined order book, the risk is that its fleet is relatively Ocean Freight Center‘s putting off customers who want more voyage and destination options. Maersk argues that many of its customers will benefit from reliability, data-driven insights and the flexibility to move cargo on short notice rather than scale. Skeptics wonder whether customers will pay more for comprehensive services, especially in a downturn.In addition, Maersk’s logistics business will compete with freight forwarders such as DHL Express and Kuehne+Nagel, which perform similar functions using various vectors. If Maersk’s tactics prove unacceptable to them, they may stop sending cargo to its ships.

Long logistics

Maersk has tried and failed in the past to transform in this way. But this is a new era. It has more data at its disposal than ever before. Companies considering whether to reduce their operations in China, create more capacity in Asia, or produce “near shore” to North America may welcome new supply chain options. Maersk may be able to offer more climate-friendly freight routes for customers willing to pay for greenery.

From an economic standpoint, the success of these two long-term strategies would be a good thing.if Ocean Freight Center Reduce shipping costs, which will help lower item prices. If Maersk becomes a smooth integrator, the supply chain could be as tiresomely reliable as it ever was – and not newsworthy.even Ocean Freight Center would welcome.

Read more from our global business columnist Schumpeter:
Lessons from Novo Nordisk’s obesity drug stampede (March 2)
It’s time for Alphabet to spin off YouTube (February 23)
Tech companies with artificial intelligence are giving modern warfare a new shape (February 16)

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