Trading Places

By Peter Tirschwell

Transshipment ports in particular have a bad reputation with shippers for causing delays .

A fuller picture emerged out of TPM24 about how newly minted alliance partners Maersk and Hapag-Lloyd plan to deliver massively improved schedule reliability , and the challenges they will face in attempting to do so .

In announcing the Gemini Cooperation alliance on Jan . 17 , which will take effect early next year , the carriers said they will achieve greater than 90 % schedule reliability once the new network is fully rolled out . That amounts to a radical pledge given that current global reliability stands at just 51.6 %, according to Sea-Intelligence Maritime Analysis . Since 2011 , global reliability has averaged 69 % and has never exceeded 86 %.

The ambition harks back to when Maersk was run by patriarch Maersk Mc-Kinney Moller , when it was said that bar pilots could set their watch to the arrival of a Maersk ship . The commitment caters to shippers ’ priority to keep inventories lean despite the chronic threat of disruption , which requires having confidence in service reliability .

“ If we are able to break what is today a ceiling in ocean reliability of anywhere between 80 % and 85 %, and deliver 90 % to 95 % reliability , we ’ re able to offer our customers a significant reduction in variability or an increase in consistency … in terms of on-time performance , and as a result a reduction in inventory costs ,” Charles van der Steene , incoming president of Maersk North America , told CNBC at TPM24 .

The carriers ’ ability to achieve unprecedented levels of reliability rests on core assumptions , among them their control of transshipment ports , consistently high levels of productivity at those ports and a reduction in the number of origin and destination ports .

Speaking at TPM24 about the latter of those assumptions , Hapag-Lloyd CEO Rolf Habben Jansen said the more ports there are in a given service string , the more opportunity there is for delay and for those delays to cascade .

“ If you look at a traditional Asia – Europe service , you would have six ports in Asia and six ports in Europe , where by definition you can have troubles that lead you to delay 12 times ,” he said .

When delays occur at one point , it increases the likelihood that a ship will miss its “ pro forma ” — i . e ., planned — berth window at subsequent ports . Then the ship is at the mercy of the port or terminal operator to fit them without disrupting the calls of those ships that arrive on schedule . Fewer origin and destination ports , “ means that all the ships that we have in the network will on average have better utilization and the likelihood that if something goes wrong , left or right or in the middle , that it immediately also impacts everything else , is a lot lower ,” Habben Jansen said .

Challenge of transshipment ports

What industry veterans say is the first huband-spoke network to be rolled out at scale on an east – west trade like Asia – Europe will be centered around 12 hub ports — 10 owned and / or controlled terminals , as well as Singapore and Cartagena — with 32 shuttles operating to and from the hubs .

Giving the carriers ’ confidence is their ability to simulate in advance via “ digital twin ” technology how a given port call will play out based on factors such as weather , the stowage plan and labor . Based on that , Maersk and Hapag-Lloyd say they have achieved individual instances of record productivity levels that they say will become standard within the Gemini network .

But as was seen during the heights of the COVID-19 disruptions in 2021 and 2022 , terminal fluidity can easily falter when volumes surge . Transshipment ports in particular have a bad reputation with shippers for causing delays and being a black hole in terms of visibility .

“ In my 40 years of global supply chain experience , there are two things I have learned to avoid : trading companies and transshipments . It ’ s always best to deal direct ,” said Daniel Krassenstein , global supply chain director at Procon Pacific , a maker of packaging products .

Indeed , many believe the success of the Gemini plan hangs on fluidity at the hub ports .

“ To deliver that level of reliability , the hubs will likely need to operate with lower overall capacity utilization to ensure no quay or yard congestion occurs ,” said Peter Ford , founder of SkyRock Advisors , former CEO of APM Terminals Salalah , Oman and head of global infrastructure at CMA CGM . “ Otherwise , the hub risks major disruption without an appropriate buffer should there be a significant weather event or other unforeseen delay at one of the outlying ports that causes unplanned berthing window overlaps .”

Ford added that the drive to deliver a high level of reliability is “ more difficult ” today than in pre-pandemic 2019 .

“ Vessel sizes continue to increase and that means higher peaks for equipment and yard utilization when they arrive ,” he said . “ Hub ports unprepared for two overlapping 22,000-TEU-plus vessel calls from a single weekly service will find themselves challenged .”

email : peter . tirschwell @ spglobal . com

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