International Maritime

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Suez Canal diversions could force shippers to reevaluate inventory strategies

By Greg Knowler

Cargo owners should be rethinking their inventory strategies as there ’ s no resolution in sight to the rerouting of vessels around southern Africa , and regulatory pressures focused on decarbonization are likely to drive a long-term reduction in ship speeds , industry executives told the Journal of Commerce ’ s TPM24 conference March 4 .

The diversions past the Cape of Good Hope to avoid Red Sea attacks by Houthi militants extend voyages by almost two weeks , and although the reroutings is having an impact on inventories , Jeremy Nixon , CEO of Ocean

Network Express ( ONE ), told the conference , the situation is still “ manageable .”

“ But if we take the projection of Robert Gates [ former head of US Central Intelligence Agency and TPM24 keynote speaker ] that potentially this goes on for another two years , then everybody ’ s going to have to rethink their supply chains and think about inventory levels and how much inventory they need to carry ,” Nixon said .

Another factor that would influence inventory levels and import lead times would be slower ship speeds , an operational strategy that was in place before the Red Sea disruptions and one that will continue as ships begin to use more expensive alternative fuels , Jan Tiedemann , senior analyst at Alphaliner , told the conference .

“ We have to transition to carbon-neutral fuels and these fuels will be four times more expensive than fossil fuels that will further incentivize slower vessels and more efficient vessels ,” Tiedemann said .

“ Irrespective of what fuel you use , if you want to be greener , you have to reduce your energy consumption , so I believe we will see longer lead times ,” he added .

Scale of transshipment underpin doubts over Gemini operating model

Peter Tirschwell ( left ) and Rolf Habben Jansen . Caught in the Moment Photography

By Greg Knowler and William B . Cassidy

The sheer scale of transshipment within the Gemini Cooperation ’ s proposed hub-and-spoke model has left shippers , forwarders and container shipping analysts deeply skeptical that a schedule reliability target of 90 % is achievable .

While the ambitious goal of Gemini members Maersk and Hapag-Lloyd was widely welcomed by those attending the Journal of Commerce ’ s TPM24 conference in Long Beach in early March , a historical mistrust of transshipment colored most perspectives .

“ The transshipment solution is not a viable solution in terms of schedule reliability for us ,” said Alison Leavitt , managing director of the Wine and Spirits Shippers Association . “ I don ’ t believe that in the history of shipping that transshipments have worked effectively and consistently ,” Leavitt added . “ In our business , we absolutely will prefer a direct service rather than transshipment .”

Rolf Habben Jansen , CEO of Hapag-Lloyd , said the carriers “ understand the skepticism ” from customers regarding Gemini ’ s planned hub-and-spoke network , which they believe will enable them to achieve schedule reliability above 90 %.

“ We have to demonstrate that it works ,” Habben Jansen told TPM24 . “ The way we operate as an industry today does not get us above 70 % [ schedule reliability ].”

Hapag-Lloyd will exit THE Alliance to launch Gemini with Maersk in February 2025 , after the dissolution of the Maersk-Mediterranean Shipping Co . 2M Alliance . The new partnership will operate a combined fleet of 290 ships with 3.4 million TEUs of capacity .

“ Hub-and-spoke is a very proven model in many other transportation modalities ,” including air freight , Habben Jansen said . “ It leads to lower cost and better quality , and it ’ s something Maersk and [ Hapag-Lloyd ] very much believe in .”

The Gemini carriers will create the network through a combination of streamlined port calls , hubs and dedicated shuttle services .

“ I ’ m convinced that when we can demonstrate 80 % to 90 % schedule reliability people will accept it , but I understand the skepticism ,” he said . “ The proof of the pudding is in the eating .”

‘ Broken connections ’

Chantal McRoberts , director of Drewry Supply Chain Advisors , said consistently synchronizing the shuttle

24 Journal of Commerce | March 25 , 2024 www . joc . com