Brave new world

With the end of the 2M Alliance, the two members involved are now planning new (individual) approaches. Effectively, the end of this operating partnership is either going to generate transshipment super-hubs or prove that direct calls are a better approach.

So, who is right, and does it matter?

END OF AN ERA – START OF A NEW ONE
Since 2015, Maersk and MSC have maintained a Vessel Sharing Agreement (VSA), allowing the lines to use capacity on each other’s ships on certain routes between Asia-Europe, Transatlantic, and Transpacific trade lanes, to optimise operations and cost efficiency. It allowed Maersk and MSC to move more than 4 million TEU together. The VSA had a 10-year term minimum and two-year notice period of termination.

In January 2023, these two container shipping companies announced that they would not be renewing their alliance come the end of their 10-year vessel sharing 2M agreement in 2025.

From the end of January 2025, Maersk is launching the Gemini Cooperation with German operator, Hapag-Lloyd. It will comprise a joint fleet, with Maersk providing 60% of the tonnage and Hapag-Lloyd the remaining 40%. The partnership is setting an ambitious target of delivering schedule reliability of 90% once the network is established.

One immediate knock on effect from the formation of this new alliance is the end of another one, with Hapag-Lloyd leaving its former partnership in THE Alliance, abandoning former Asian Partners, Ocean Network Express, HMM and Yang Ming.

This left THE Alliance searching for new partnerships to fill the gap that Hapag-Lloyd left and then on September 9, 2024, the Premier Alliance was announced with Wan Hai joining THE Alliance from February 2025 and the new branding starting at this time.

GEMINI – NETWORK OF THE FUTURE
The announcement of the Gemini Cooperation signals a number of key changes to the operating approach from Maersk and Hapag-Lloyd. Table 1 provides a summary of what Maersk refers to as the “Network of the Future” which also includes:

• Network centred around hubs that are jointly controlled and managed by Gemini Cooperation partners – i.e. Shanghai, Tanjung Pelepas, Tanger-Med, Rotterdam.
• Dedicated shipping ‘shuttles’ run by Gemini Cooperation partners will serve an extensive network, complemented by feeders. This will provide synchronised connections with mainliners with the objective of halving dwell times and enabling cargo to reach the desired destination faster (although this is unlikely to result in more rapid deliveries than direct services).
• No direct services to Baltic or Nordic countries – with the assumption that Baltic states and Finland will be served by third party feeders. At the other end of the service, no direct services to South Korea or Japan.
• Fewer stops – e.g. moving a container on the current AE10 string, the service makes seven stops from Xingang to Bremerhaven, but this is changing to only three stops across two services of AE9 from Xingang to Tanjung Pelepas (where it is transshipped) onto AE5 with stops at Felixstowe before arriving at Bremerhaven. This is just one example, but highlights fewer port calls and more hub use.
• Direct connections to Asia-Europe services and US services providing much improved transit times.
• Gemini co-operations to be built around 90% schedule reliability.
• The transition from Cape to Suez will “only happen when safe to do so” and on a permanent basis, but Maersk maintains it is “prepared” for either scenario.

The alliances established by major container shipping lines have always been regarded by the industry as “marriages of convenience” so were only ever temporary.

An obvious question to ask, is why now and why Gemini? For Maersk there are a number of likely reasons. Concerns over a loss of market share to the likes of MSC, CMA CGM and Cosco, coupled with less investment in the largest vessel classes, are the obvious, initial takeaways.

In reality, it may also be seen as a defensive move, designed to offset (minimise) this loss of market share. The deal is being sold as beneficial to shippers through improved services.

FORMULA 1 PIT STOP
The approach being taken by MSC is different, as Soren Toft, CEO, MSC (and former senior Maersk man) has been confirming across the conference circuit in Europe. “Our stand-alone, alliance-free, East-West service network gives us the operational freedom and flexibility highly demanded by the market,” he has been quoted as saying.

He has also been vocal in highlighting a need for significant improvements in outdated port infrastructure and productivity, while also better balancing the integration of needed new technologies to avoid displacing existing workforces.

MSC plans to expand its port coverage with 34 loops and over 1,900 direct port combinations. It is also investing in more than 100 ports globally, recently acquiring a stake in HHLA, Hamburg’s leading terminal operator.

“These investments will allow us to manage port calls with the precision of a Formula One pit stop,” Toft confirmed.

MSC has been increasing its fleet substantially in the past five years to be able to develop an extensive network based on direct port calls. “We want to be stand-alone. We will be in charge of our own destiny, so that we can provide the speed, agility and decision-making to our clients that we want,” the company’s leadership has also confirmed.

MSC’s aggressive newbuild strategy currently means that the shipping line can offer over 6.1 million TEU of total container capacity, representative of an estimated 20% of the global market. Add to this the largest orderbook among container vessel operators then this means that there is a clear strategy in place ready for 2025 offering direct port calls and broad geographic coverage.

MORE QUESTIONS THAN ANSWERS
As the end of 2024 approaches, there are more questions than answers for the planned new approaches in 2025, irrespective of the Gemini or MSC strategy. These include:

• Do the shipping lines have sufficient ships to make their plans work? Despite its desire to be “standing alone” MSC has still formed a VSA with the newly confirmed Premier Alliance (comprising HMM Co Ltd (HMM), One Network Express (ONE) carriers and Yang Ming Marine Transportation (Yang Ming). This new alliance is for five years from February 2025 and will help offset volumes lost by former member, Hapag Lloyd, too.
• For Gemini, can the nominated hubs successfully handle all planned deep-sea ships and feeder calls?
• Are there enough modern (and green) feeder vessels to handle the increased demand generated from the Gemini strategy?
• Will the planned aim (of Gemini) of gaining total integration for all IT across the whole hub/network work? What initiatives are there to do so?
• Will third party business now be less appealing to key hubs that are operated by sister-companies within the same organisation as the shipping line? In short, will APM Terminals have space at its hubs for any third party/non-Maersk volumes, and will other lines be keen to call – and contribute to a competitor’s bottom line?

The reality is nobody really knows yet. As one senior port executive at a leading US container port (who wished to remain anonymous) says: “We are scheduled for Gemini calls, and calls from another major line changing working arrangements, but when will we know the sizes of the ships that will be calling? At best, we used to get two weeks’ notice for vessel changes. We think it will be less and leave us little time in advance…”

There are genuine concerns being raised, especially as container ports are currently experiencing chaotic schedules too.

Vessel bunching, where multiple vessels sail on the same week on the same service, has reportedly increased sharply this year already, not helped on Asia-Europe routes by the ongoing Red Sea shipping crisis. And any schedule delay simply pushes the issue along the shipping line rotation to the next port of call.

The issues are widespread. Anecdotal reports state that Singapore has seen “about 90%” of container vessels arriving off-schedule, compared to an average of about 77% in 2023. Moreover, vessel port time at PSA has also increased by 22% compared to the same period last year, so much so that PSA Singapore reactivated older facilities for box operations and added significant manpower in an effort to play catch-up.

‘MAGIC BULLET’
It seems clear that 2025 is going to represent the start of a brave new world indeed but one that could create uncertainty for beneficial cargo owners. MSC has a strong view that “standing alone” and direct calls is the way forward, while for Maersk the approach to be put into action by Gemini represents its own ‘magic bullet’ strategy.

Who will be successful? Ask that question again this time next year.