12 March 2024 (Lloyd's List) - THE sheer scale of Mediterranean Shipping Company’s fleet will shield the world’s largest container shipping line from any negative impact stemming from the fallout of its alliance partnership with Danish giant Maersk.

Speaking at Capital Link in New York, Bud Darr, MSC Group’s executive vice-president for maritime policy and government affairs, said that the company’s large-scale investment to expand capacity, including significant moves in the secondhand tonnage market, puts the group on a firm footing ahead of the post-2M era.

Put bluntly, Darr said, the group is “prepared”.

He explained how the group’s multi-billionaire Italian founder and owner Gianluigi Aponte’s vison is to continue to be an ocean carrier first and foremost.

“Our moves reflect that… we’ve focused on being an ocean carrier and that is our fundamental business model,” said Darr.

This, he said, in contrast to what MSC’s “friends in Copenhagen” have chosen to focus on over the past few years.

MSC will be without an alliance partner from 2025 following the dissolution of 2M. Maersk will join forces with fellow European carrier Hapag-Lloyd to share services on the major trades as part of its new Gemini Cooperation.

While Maersk has made its big announcement post 2M with the formation of the Gemini Cooperation from next year, Darr said that for MSC such a large-scale partnership is off the table.

“With our market share close to 20%, if it was a challenge before to get a major alliance approved, it would it be an even bigger challenge now,” he said.

However, he said the line has not ruled out co-operating with other carriers.

“You could think of it more in terms of slot-sharing agreements and VSAs (vessel sharing agreements),” Darr said.

“We have many VSAs around the world or slot sharing agreements beyond 2M anyway, which is a relatively small amount of our overall portfolio.

“As long as the regulators are open to the possibility that we can operate like that, we could serve more markets, as we can serve them better and more efficiently by leveraging our assets with other assets and better serve the customer.”

Colossal fleet

As MSC goes it alone, the group will be supported by a colossal fleet, one that far outweighs its rivals thanks to its multi-billion-dollar splurge on new and secondhand tonnage.

The latest figures from Alphaliner show the Geneva-based group’s capacity on the water stands at around 5.7m teu. This compares to the 4.2m teu operated by its closest rival and 2M partner Maersk. MSC also has more than 1.4m teu on its orderbook.

Darr said that in the future, this will grant MSC “flexibility” to respond to the needs of the market.

“We’re ready for when a rainy day comes, like this rainy day that none of us could have anticipated,” Darr told Lloyd’s List in reference to ongoing disruption in the Red Sea.

“We were ready to deploy the additional capacity that we have acquired. So, I think when we look at contingencies in the future, whether they're more commercially or debt driven, I think those companies that have the assets available, rather than having to find them can be more nimble.”

This flexibility also extends to riding out the growing concern of impending overcapacity.

“If it turns out that there is a mismatch [between supply and demand], too much supply will probably just accelerate the retirement of the older ships that are in our network and we’ll replace them newer, more efficient ships,” he said.

“It’s not like we’re going to operate a secondhand ship forever. And we need new, more efficient tonnage to come into the networks in order to meet the variety of evolving regulatory needs that are out there.”

Darr added that regulations had helped absorb capacity. The International Maritime Organization’s Carbon Intensity Indicator in particular “has had an immediate effect”.

“It has absorbed say 7%-10% of the tonnage or capacity available in our networks,” he said.

“If you’ve done the easy stuff [to cut emissions], or even harder stuff like ballast and propellers, slowing down is one of the measures you can use to comply with that and EEXI and EEDI as well. You're going to operate at slower service speeds.”

Darr is also adamant that the extra capacity has helped the industry weather the Red Sea crisis.

“If the utilisation rates we were at going into the pandemic, and this red sea disruption happened we would be in a very, very difficult position,” he said.

“But we invested in the extra capacity just as all those in the value chain should be investing in extra capacity in the supply chain having learned from the pandemic.

“We're glad we have that capacity today and we're able to deploy it even if it comes at a different cost.”