Commentary Trading Places

By Peter Tirschwell

“ Whether Gemini achieves its reliability goals is both within and outside its control .”

With the Gemini Cooperation set to officially launch on Feb . 1 , repositioning of ships is under way , thus kicking off one of the boldest and riskiest gambits the container shipping industry has seen in a long time .

By promising 90 % -plus schedule reliability using a hub-and-spoke network , the Maersk / Hapag-Lloyd alliance is tacking sharply away from the industry pack in attempting to solve the problem of unreliable schedules that still plague the industry well after the end of COVID-19 .

The questions hovering over that strategy and its chances of success fall into two main categories . The first is whether the concept can deliver operationally ; in other words , when fully implemented by mid-year , will it achieve the promised 90 % -plus schedule reliability ? Remember this comes at a time when the industry average was 55 % as of November , with Maersk and Hapag themselves not much different , according to data from Sea-Intelligence Maritime Analysis .

The second , assuming it succeeds operationally , is whether it will find a market large enough to keep its ships filled without having to chase market share in a potentially weak 2025 market , and possibly even extract a premium at some point , if the reliability is so consistent it can influence inventory decisions .

Operationally , a key factor in favor of the concept is the two carriers ’ ability to rely on each other to be committed to schedule integrity . That not being the case in their previous alliances was a contributing factor in the break up of both those partnerships .

The mutual commitment appears to be real . Maersk has a long history of prioritizing schedule integrity , a principle espoused by its patriarch Maersk McKinny Moller , known to employees as Mr . Moller .

“ Historically , going back to Mr . Moller and his father , Maersk wanted to be known for reliability ,” said a former Maersk executive . “( As in ) ‘ I know it ’ s time for dinner because the Maersk ship always passes by at dinner time .’”

Furthermore , the success of the Maersk integrator strategy — where it aspires to manage customers ’ end-to-end supply chains — rests on a foundation of schedule integrity , a reputation it needs to reclaim . “ Maersk appears to be trying to restore its focus back to the core shipping business ,” said a second former Maersk executive .

For Hapag-Lloyd , a self-described “ pure play ” container line , becoming the “ undisputed No . 1 ” carrier for quality is core to its Strategy

2030 . Achieving that must include schedule reliability .

Managing internal and external factors

Whether Gemini achieves its reliability goals is both within and outside its control . Within its control are owned or controlled hub ports , such as Port Tanjung Pelepas in Malaysia ( PTPM ), in which APM Terminals has a 30 % stake . Confidence in PTPM fluidity to manage handoffs between feeders and mainliners stems from its strict policy of limiting volumes on its terminal to levels it knows it can handle , a longstanding policy that avoided the congestion that affected other Asian transshipment ports last year and during the pandemic .

External factors are more challenging . Congestion has been growing at key ports in China , by far the largest container shipping market , partially because it has largely stopped building port capacity ahead of demand as it did for many years , Asia veterans tell Journal of Commerce . Now , demand is catching up to capacity , a long-term problem not just for Gemini . Shanghai and Ningbo had the most congestion globally as of Jan . 12 , according to Linerlytica . “ Who would have thought that Shanghai and Ningbo would become the most congested ports in terms of capacity waiting to berth ?” the company said in a LinkedIn post .

Whether a large enough market awaits an east-west network with high schedule reliability , and whether customers will be willing to pay a premium , are big unanswered questions . Conceptually , if shippers come to trust Gemini ’ s reliability , they could reduce inventory and be willing to share the value created with the carriers by paying a premium .

“ For a supply chain to take out meaningful inventory costs , the reliability of the ocean leg has to be over 95 % reliable ,” the first former Maersk executive said . “ Below 95 %, the retailers will not trust the supply chain enough to take inventory cost out .”

But even if that is achieved , the issue of bifurcated supply chains arises . A reason for the 2015 suspension of Daily Maersk , an earlier attempt at schedule reliability at scale , was customers not being able to divide their supply chains between high-reliability and low-reliability services and thus being unwilling to pay a premium .

email : peter . tirschwell @ spglobal . com

62 Journal of Commerce | February 3 , 2025 www . joc . com