Commentary

By Lars Jensen

One topic that rarely came up unprompted was the environmental impact of the Red Sea crisis .

The Journal of Commerce ’ s annual TPM conference in Long Beach is the largest gathering of decision makers across the wider container shipping industry globally . This year ’ s edition was no exception .

There were plenty of speakers , plenty of content and plenty of corridor talk . Perhaps one of the underrated values of the conference is the latter . These off-stage conversations are where the more intangible sentiments among participants can be picked up , and given the way the industry works , such sentiments can be an important element in things such as annual contract negotiations .

This year , there were two elements that were high on this intangible agenda of corridor talk , and one that was noticeable owing to its lack of prominence .

The Red Sea crisis was obviously a big talking point , not from the perspective of people trying to guess when it would be over , but more from the perspective of how to manage a situation where the conflict continues for the foreseeable future . In terms of a resolution , most appeared resigned to the view that there is no immediate solution .

The issue was , therefore , how much this will weigh on annual contract negotiations . How much are spot rates going to decline from the high point seen before Chinese New Year ? How can parties come to a contractual agreement that can survive a likely rate crash when the Suez routings return to normal ?

In terms of the rate decline , there was a clear undercurrent of waiting as long as possible , as shippers saw this as a way to place more pressure on the carriers .

The objective risk to such a strategy would be if more problems arise . This is not an unrealistic scenario ; keynote speaker Robert Gates , former US Defense Secretary and CIA director , painted a picture of a world where increasing local conflicts should be anticipated . Hence , the wait-and-see strategy in relation to annual contracts is a risky one .

The other major topic that arose frequently in the corridor talks at TPM24 was the Gemini Cooperation — the new alliance between Maersk and Hapag-Lloyd that launches in February 2025 . There was widespread skepticism as to whether a network with more emphasis on hub-and-spoke and less on direct services would be able to deliver the service levels required by shippers .

From an analytical perspective , there should be less grounds for concern . The past three and a half years have clearly shown massive operational problems , first due to the COVID-19 pandemic and then due to the Red Sea crisis . The experience of shippers has clearly been one of abysmal performance related to predictability and reliability .

But those three and a half years have been anything but normal , and it is hard to see how carriers could have managed the curveballs any better . Looking at the performance levels prior to the pandemic , it is clear that some carriers were indeed able to provide a relatively high degree of reliability — at least higher than in recent years . For example , the 2M Alliance ’ s performance in 2019 was higher on the Asia – Europe trade than the 90 % target promised by the Gemini partnership .

Of course , the proof is in the pudding , and we need to wait until 2025 . But in a “ normal ” world , it is not unreasonable to think that Gemini can indeed operationally pull off what it has set out to do .

One topic that rarely came up on its own accord on the TPM24 sidelines was the environmental impact of the Red Sea crisis . Granted , I am writing this from my own subjective perspective as to what I experienced , so it might simply be I have a biased selection of people I ended up talking to . But the following is worth a thought : The Red Sea crisis is resulting in diversions around southern Africa that are adding some 5,000 nautical miles to transits , and consequently , a sharp increase in emissions . Yet , I experienced no one who brought up this issue unless prompted .

It appeared that the underlying sentiment was that this was indeed a problem , but a problem with no real solution and so better not to bring it up . And because of that , an unspoken sentiment was that the supply chain ’ s stability has a higher priority than established emissions targets .

When prompted on the subject , there appeared to be a strong leaning toward a belief that the industry as a whole would not be able to meet the stated emissions targets . Not a disagreement with the targets and direction as such , but a sentiment that the targets were simply unrealistic in the real world for the totality of the industry , especially for 2030 .

email : lars . jensen @ vespucci-maritime . com

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