After almost a decade of relative structural stability in the liner shipping industry, early 2025 will herald another significant period of change. Analysts believe the changes will probably not be as dramatic as in the past; nevertheless, even a small degree of uncertainty can lead to rates falling sharply as individual carriers become nervous and increasingly focused on market share considerations.
From February 2025, there will be changes to two of the three existing global alliances as 2M (Maersk Line and Mediterranean Shipping Company) is dissolved and Hapag-Lloyd leaves THE Alliance, where it operates alongside HMM, Ocean Network Express (ONE), and Yangming. The Ocean Alliance (CMA CGM, Cosco Shipping Co, Evergreen Line, and OOCL) will remain unchanged. Significantly, its members have agreed to extend the cooperative arrangement until 2032.
“This decision forges our commitment to meet our customers’ needs and build even more secure, reliable, and sustainable supply chains,” said Rodolphe Saadé, chairman and CEO of CMA CGM. “Our diversity is our strength and together we will continue to pioneer our industry.”
The Ocean Alliance’s move ends rumors and speculation that one of the members might ‘jump ship’ to THE Alliance. Some commentators had suggested that Evergreen may have been thinking of such a move.
While MSC will operate independently from next year and it had been expected that Maersk, in pursuit of its freight integrator strategy and need to exercise tight control over its network, would as well.
Gemini Cooperation
But in January, the world’s second largest liner company announced that it would partner with Hapag-Lloyd in the Gemini Cooperation. Gemini will comprise a fleet of 290 vessels, aggregating 3.4M TEU. It will offer 26 mainline services and 32 shuttle (intraregional/feeder) trades across the main trading regions (Asia, Middle East, Europe, and North America).
Maersk will contribute 60% of the capacity deployed and Hapag-Lloyd 40% of the slots. Gemini will run for three years, after which a 12-month notice period will be required should either carrier wish to withdraw.
Research by Drewry, the London-based maritime research and advisory group, has attempted to shine some light on the new structure that might exist from next February, the options that individual carriers and particularly THE Alliance have in the run-up to the new order, and the challenges faced. This research was presented in a webinar hosted by Tim Power, managing director of Drewry, and Tony Mason, a senior associate of the firm.
East-west network domination
The key findings were that the Ocean Alliance with its 40 services across the main east-west network would dominate in all trade lanes apart from the transatlantic. Gemini with 21 services would be second in terms of its coverage with The Alliance (19) and MSC (15) in third and fourth places, respectively.
While MSC appears to be the main loser and particularly in the Asia/Europe/Asia trade, Mason pointed to the carrier’s large order book for ULCV tonnage (above 16,000 TEU) as giving it the opportunity to start new strings and its strategy of already having started several independent loops outside of 2M.
Despite many commentators’ views that Hapag-Lloyd’s resignation from THE Alliance would leave it with significant tonnaging problems and service string shortages, this was dismissed by Power and Mason. ONE is the biggest provider of ships in the Alliance and it is only in the transatlantic trade where its representation would be a problem.
“It’s hard to see how this market could be served by just one loop which is what we predict they could have based on current and available information,” said Power.
Vessel sharing agreement
In terms of THE Alliance’s various options when it comes to attracting a potential new member, an intra-Asia specialist was mentioned as a ‘most likely candidate’. Wan Hai already has some experience of working with THE Alliance in the transpacific trade, for instance, and has aspirations of expanding outside of the Asia region.
Interestingly, Mason suggested that The Alliance and MSC maybe should look at some form of vessel sharing agreement as a means of filling in some of their service shortfalls in markets like Asia/Europe/Asia and the transatlantic.
Operationally, Power expressed some concerns over Gemini’s heavy reliance on hub and spoke networks, questioning whether this would give them the cost leadership to be competitive.
He said: “Their strategy has to be robust as it will be critical to the success or failure of the VSA. “Managing the network to ensure reliability, managing the terminals which will have a very large number of vessel calls and managing the big exchanges that will put a lot of pressure on the yards will, operationally, be very challenging.”
Power added: “The more you try to squeeze the time, the less room you have for error,” He concluded: “If they don’t get it right, they will be in trouble.”
