Tradelanes / The post-tariff evolution of MSC's transpacific network

Photo: VesselFinder

Since the shift in alliances earlier this year, Gemini duo Maersk and Hapag-Lloyd have been given the perfect stage to put their money where their mouth is and provide reliability in an unreliable market – their USP.  

But now its MSC’s turn to play its ‘Trump’ card. 

The demand volatility on the transpacific has given lone-wolf shipping giant MSC an opportunity to showcase its ability to “actively and strategically play the market faster than most of its peers”, to quote chief analyst at eeSea Destine Ozuygur. 

Alphaliner spotted earlier this week that MSC had been adjusting its tonnage deployment on the Asia-US east coast America / Z7S service it operates as part of a VSA with Israeli carrier Zim. 

Since its launch in February, the service deployed a mixed fleet of seven ships of some 8,000 teu and five of 13,000 teu, but the Geneva-based carrier is progressively phasing out the larger units, slimming down the fleet to 13, ranging from 7,800 to 9,400 teu, resulting in an overall capacity reduction of about 18%, with weekly capacity down 12%.  

“These adjustments align with previous service closures the carrier decided in regard to the lowering demand for transpacific shipments,” said Alphaliner.  

Indeed, MSC’s transpacific proforma capacity perfectly encapsulates the tariff announcement saga and its impacts.  

(Caveat: the data below, supplied by eeSea, reflects incoming capacity to the first port of discharge in North America, so the impact of the tariff announcements has a round-trip delay) 

The story begins in March, before – for want of a better expression – the shit properly hit the transpac fan. MSC’s proforma capacity was some 235,000 teu. 

After 2 April, things began to escalate, with a series of tariff announcements, soon followed by 90-day pauses, leading many in the industry to predict another wave of front-loading.  

Among them was MSC, which in April hastily upped its transpacific proforma capacity by 37%, to 321,000 teu. 

After a few days of ‘tit for tat’ tariff play between the US and China, duties peaked at 125% on US exports to China and 145% on Chinese exports to the US – and stayed that way until 12 May. 

During this period of astronomical pricing on what was previously cheap Chinese goods, US consumer confidence appeared to falter and there was a subsequent 16% drop in MSC’s May and June proforma capacity, with both months at 271,000 teu.  

Good call

Container Trades Statistics reported China-US east and west coast trade volumes dropped to 549,843 teu in May, from April’s 664,493 teu. 

Then, after 10 May, trade talks in Geneva, China and the US resulted in reduced tariffs on one another’s exports, to 10% and 30% respectively.  

But, given the threat that this deal will expire 12 August and jaded by the constant uncertainty, US importers rushed to replenish stocks depleted during April and front-load goods for the remainder of the year. 

MSC was more than happy to offer them capacity, and the carrier’s transpacific proforma capacity peaked in July at 346,000 teu.  

Where this tale is now headed, no one knows, but MSC seems fairly confident that demand on the transpacific will hold. Its August proforma capacity is currently 324,000 teu, declining slightly in September, to 320,000 teu.  

And while the carrier does not have a crystal ball – as far as we know – it does have more than 6.6m teu across some 900 vessels at its disposal.  

Not only does it boast the biggest fleet of all the carriers, but now has no one to run operational changes by, since Maersk, its former 2M alliance partner of 10 years, is now with Hapag-Lloyd in the Gemini Cooperation.   

The MSC America service increased the number of vessels operating the string to 14 in May, and then reduced this to 13 last month, while the Orient service is also set to reduce capacity – average teu will drop in August.  

Meanwhile, its Pearl-Shikra service, which began in May and saw its first arrivals into the US west coast in June and July, will also be phased out by mid-September. This service had transitioned from the MSC Pearl, which was short-lived from February through the first week of June.

Another uptick in May was attributed to the Lone Star Express, which saw the number of vessels grow by two and average vessel size by about 2,000 teu.  

Meanwhile its Asia-US east coast Emerald service saw a drop in maximum vessel capacity from 9,400 teu to 7,900 teu last month.  

“These mercurial operational shifts are really characteristic of MSC, and equally one of the reasons why it is so successful,” said Ms Ozuygur. 

“It’s a headache for us on the analytics side to keep up with, but you can’t fault stakeholders for maximising adaptability in this environment.” she concluded.