2M-related modal shift will generate massive savings

If the Maersk/MSC 2M vessel sharing agreement (VSA) gets official approval from the US Federal Maritime Commission (FMC) next month, it should mark the start of a monumental modal shift for US import cargo from Asia, according to Marco Pluijm, ports sector manager of Bechtel, speaking at last week’s African Ports Evolution Conference in Durban. And, according to the US press, the beginning of the 2M joint operations in the eastwest trades may be as soon as early next year if the two lines get the nod from the FMC. They should know by October 11 whether they will be allowed to go ahead in the US trades. And this time it is unlikely that the Chinese authorities will veto the two-line deal. First, because it is considered to be no more than a pure VSA, with none of the other marketing and operational agreements of the previous Maersk/MSC/CMA CGM P3 network which China snubbed earlier this year. And secondly, the US – where ocean carriers are subject to the requirements of the Shipping Act of 1984 administered by the FMC – is the only jurisdiction in which 2M needs to receive explicit approval, according to Maersk and MSC. When (or still possibly if) this VSA is approved, an intriguing situation arises. On the current Asia to North Europe trade, the two lines – plus others, like CMA CGM and UASC – are using the new mega container ships of 18 000 TEU plus capacity. These can sail through the Suez Canal. And the logic is that larger capacity vessels could also be deployed on the Asia-US East Coast (USEC) run, where the current largest are about 10 000 TEU, according to Pluijm. Figures he quoted from an IAPH/Drewry survey in April this year showed that the largest vessels on the three main routes from Asia were all larger than that. As we said, 18 000+ TEU on Asia- Northern Europe; 14 000 on Asia-Mediterranean and Asia- Middle East; and 13 800 on Asia-US West Coast (USWC). But there’s a lot of extra cargo available once larger vessels start calling on USEC as the 2M intends. And that, according to Pluijm, could come from cargo ultimately bound for the East Coast and its western hinterland which currently arrives at West Coast ports. He then explained the logic behind the anticipated modal shift. “Currently up to 70% of the West Coast containers move East by rail and road,” said Pluijm. “If we assume that 15-20% of West Coast containers move all the way to the East Coast, this equals 3 to 4 million TEUs a year.” And there are considerable savings to be made, along with a much better “green” profile, if that cargo goes direct by sea to the East Coast, rather than road/rail from the West. When these containers shift from overland transport to all-water, direct import via the Suez Canal on bigger carriers, what would be the savings? Said Pluijm: “It would be 20-30% on direct freight costs from the Far East to the USEC due to the all-water economy of larger-scale shipping. “Also 30-40% (or even more) on direct freight costs due to a 40-50% shorter overland transport distance in the US itself. “And 20-30% in emission on the all-water route (lower fuel consumption, more efficient engines) plus 40-50% reduction in overland emission.” A massive modal shift purely from cargo bound for the East Coast and its immediate hinterland, but one with distinct savings, according to Pluijm. INSERT & CAPTION West Coast containers that currently move East by rail and road could now move all the way to the East Coast by sea, resulting in huge cost savings. – Marco Pluijm