Carrier Alliance Reshuffle Moves Are Happening
Big changes are happening in the international shipping landscape, or waterscape (?), as the 2M, Ocean, and THE carrier alliances are reshuffling.
These three carrier alliances, tying all of the world’s major ocean shipping lines together with vessel sharing agreements, have dominated international shipping for almost a decade. When news broke, a year ago, that the 2M Alliance, between the two largest ocean freight carriers (MSC and Maersk), is splitting, it was only a matter of time before a shift happened with the other two alliances.
Speculation felt like guessing the plot points of a cheesy novel. Which alliances would fall or split? What new alliances might form? The first big turning point after the inciting incident of Maersk and MSC breaking up came last week.
Hapag-Lloyd Is Leaving THE to Form Gemini with Maersk
News dropped that Hapag-Lloyd is leaving the THE Alliance to form a new one with Maersk. Greg Knowler knows all about it, and reported on the news in a Journal of Commerce (JOC) article:
Maersk and Hapag-Lloyd on Wednesday unveiled a new operational partnership called “Gemini Cooperation” that will begin early next year and revolve around a global “hub-and-spoke” network of owned or controlled terminals in key locations.
Hapag-Lloyd will exit THE Alliance and link up with Maersk in February 2025 after the dissolution of the Maersk-Mediterranean Shipping Co. 2M Alliance. The Gemini Cooperation will operate a fleet of 290 vessels with an overall capacity of 3.4 million TEUs serving the major global trade lanes.
The cornerstone of the new partnership will be the hub-and-spoke network the carriers believe will enable them to achieve schedule reliability above 90%, a level that has not been achieved in years and would differentiate Gemini from other alliances.
Majorly Improved Carrier Reliability?
That 90% reliability mark would be incredible for the international shipping industry, in which carriers are notoriously unreliable when it comes to reaching ports with goods on schedule. To be fair to carriers, there are many factors outside of their control that contribute to this problem. Congestion at any major shipping hub around the world can send ripples through supply chains, causing a chain reaction of delayed arrivals. However, carriers’ practices around blanked (cancelled) sailings, often to limit capacity and put upward pressure on freight rates, come into play. A lot.
The arrangement of the carriers into three alliances controlling global shipping has given carriers much higher control over capacity. It’s something I’ve been outspoken about, calling on regulatory agencies to reconsider approval of these massive vessel sharing agreements that result in reduced competition and increased risk in the international shipping industry. Warnings like mine were validated when the alliances coordinated for hundreds of blanked sailings at the beginning of the pandemic for fear of losses from expected reduced demand. The mass blanked sailings massively contributed to the supply chain crisis that followed.
If Maersk and Hapag-Lloyd’s Gemini Cooperation does achieve 90% reliability, it may spark competition from other carriers and their alliances to increase their reliability. Shippers would welcome that kind of competition in the industry.
What Now for THE and Ocean Alliances
Over a quarter of THE Alliance’s tonnage comes from Hapag-Lloyd. It’s hard to imagine that won’t cause the alliance, or its individual remaining members, to scramble, maybe even attempt to poach carriers from the Ocean Alliance. Despite this, THE is saying “it’s business as usual in 2024,” according to another JOC article from Knowler:
Ocean carriers within THE Alliance on Wednesday pledged their “unwavering commitment” to the vessel-sharing agreement — for at least this year — following last week’s surprise announcement by Hapag-Lloyd that it was leaving to join the new Gemini Cooperation with Maersk.
“We wish to emphasize our unwavering commitment to maintaining a robust cooperation throughout 2024, ensuring that the highest standards of cooperation and exceptional service are delivered to our stakeholders and the industry at large,” member lines Hapag Lloyd, HMM, Yang Ming Marine Transport and Ocean Network Express (ONE) said in a joint statement.
Of course, that’s only an unwavering commitment for the rest of this year. It sounds like they’re already trying to figure out what they’ll do afterward. I expect we’ll hear more big carrier alliance arrangement news well before this year is out. So far, the Ocean Alliance is the only one to stand pat. We’ll see if that will last long.