Trading Places

By Peter Tirschwell

That Maersk and Hapag-Lloyd publicly committed to 90 % schedule reliability begs the question : What ’ s changed ?

In subtle but telltale ways , the formation of the Gemini Cooperation between Maersk and Hapag-Lloyd announced on Jan . 17 showed how container shipping — and the world around it — is changing .

In a move that accelerates the first reshuffling of global carrier vessel-sharing agreements ( VSAs ) since the existing alliance structure took shape in 2017 , the two Europe-based carriers as of February 2025 will create a VSA of 290 ships and 26 services across seven trade lanes .

But this was hardly a normal alliance announcement for two reasons . The first was the carriers ’ stated goal of 90 % on-time performance , a significantly higher level than presently exists in the industry . In stating this goal , Maersk and Hapag-Lloyd signaled they see an opening to differentiate themselves from carriers less committed to schedule reliability .

Second , they said the new alliance will operate as a hub-and-spoke network , a move that reinforces the message of quality and reliability . This is ambition at an audacious scale ; getting shippers to embrace a high-quality container service at scale that has not been achieved in the past .

Ocean carrier Matson , for example , found a niche in the eastbound trans-Pacific with small , fast ships and high levels of container availability and on-time performance , both at port and for inland delivery . A recently renewed joint venture between forwarder UWL and Swire Shipping is replicating this model with fast , predictable service between Vietnam and the US Pacific Northwest .

But the concept has never succeeded at scale . Daily Maersk , an envisioned “ conveyor belt ” from Asia to Europe introduced in 2011 on the premise of making shipping “ predictable and on-time ,” was discontinued in 2015 . “ There were not enough customers who wished to use Daily Maersk ,” a Maersk executive told Shipping Watch at the time .

And that wasn ’ t the only example . APL ’ s “ ocean 53-foot ” containers , first deployed in 2007 for the apparel industry , never captured the premium rates the company was hoping they would . It was unable to generate higher margins and didn ’ t survive .

An era of increased risk

Maintaining a high level of schedule integrity over time has arguably become even more difficult for carriers . The modern alliance era is defined by groups of carriers engaging in coordinated capacity management , giving them a powerful , previously unavailable tool to calibrate supply and demand to current market conditions .

That capability has been on full display since 2022 , as carriers responded to post-pandemic overcapacity by blanking sailings . Even though freight rates , port congestion and carrier profits all normalized in 2023 , schedule reliability did not . Global schedule reliability , which averaged 78 % in 2019 , had only recovered to 62 % in 2023 , according to data from Sea-Intelligence Maritime Analysis , due to active capacity management by carriers .

But even over the longer term , schedule integrity has been mostly aspirational . Since 2011 , industry-wide schedule reliability as calculated by Sea-Intelligence never exceeded 86 % in any given month , and the average over that time is just 69 %. To achieve its reliability goals , the Gemini alliance will be “ limiting the number of calls per loop to a minimum , hoping to reduce delays and ensure fast turnarounds of ships ,” according to a report from industry analyst Alphaliner .

Still , the fact that Maersk and Hapag-Lloyd publicly committed to 90 % schedule reliability begs the question : What ’ s changed ?

The answer is , in a word , risk . Global supply chains have gone from being cheap , minimally disrupted and supported by a global trade consensus to being fraught with risk and uncertainty . The attacks on shipping in the Red Sea and mass diversions around Africa illustrated a new reality ; although the COVID-19 pandemic might have been a once-in-a-century public health crisis , disruption to international supply chains on an unimaginable scale will continue due to other crises with origins in geopolitics , climate and / or natural disasters .

Maersk felt strongly enough that in an era of elevated risk , a segment of the shipping public would value asset-based , end-to-end integrated service that it embarked on the most ambitious business model reinvention the industry has ever witnessed .

Hapag-Lloyd has hewed to a more traditional strategy , but its terminal-focused acquisition spree over the past two years — including deals for operators JM Baxi in India , SAAM Terminals in Latin America , Wilhelmshaven in Germany and Spinelli Group in Italy — show it also sees value in controlling key assets that enable greater reliability .

If Maersk was on its own in its integrator strategy , tacking away from the fleet and acquiring no shortage of detractors in the process , Gemini represents a vote of confidence .

As Hapag-Lloyd CEO Rolf Habben Jansen put it in announcing the formation of the Gemini VSA , “ Teaming up with Maersk will help us to further boost the quality we deliver to our customers .”

email : peter . tirschwell @ spglobal . com

46 Journal of Commerce | February 12 , 2024 www . joc . com