A new maritime alliance named “Gemini,” formed by Danish shipping giant Maersk and German competitor Hapag-Lloyd, is set to commence operations in February of next year. This initiative comes in response to the ongoing challenges in shipping timeliness, with the two companies aiming to significantly reduce delivery delays. Their strategy involves deploying larger vessels and decreasing the number of ports each ship will visit.
Since late last year, shipping companies have faced significant disruptions, particularly after attacks by the Yemen-based Houthi movement on vessels in the Red Sea forced them to route around South Africa instead of passing through the Suez Canal. This detour has added at least two weeks to transit times and exacerbated rising freight costs.
Despite the hurdles, Maersk and Hapag-Lloyd have emerged as the most reliable players in the industry, boasting a current on-time delivery rate of approximately 55%. A senior Hapag-Lloyd executive expressed to The Wall Street Journal that this figure is “unacceptable,” with the Gemini alliance aiming to elevate that percentage to 90%.
Currently, the cost to ship a container from China to California has dropped to around $4,834, significantly lower than during the peak of the COVID-19 pandemic but still well above the $2,440 rate seen earlier this year. Freight rates from Asia to Europe have also seen a decline, dropping from $4,040 in January to $3,850 now.
During the pandemic, shipping companies ordered numerous new vessels due to a shortage, but as demand has cooled from its peak, they are now grappling with an oversupply of ships. Analysts predict that once the Red Sea reopens, freight rates could see substantial decreases, leading to a natural decline in profits for shipping companies.
To combat the anticipated profit squeeze, shipping operators recognize the need to enhance operational efficiency. Participants in the Gemini alliance have indicated their goal is to retain both new and existing customers who are willing to pay a premium for reliable, on-time service. One of the methods to achieve improved punctuality involves cutting the number of ports of call for ships traveling from Asia to Europe by about half, from the current ten.
The vessels in the Gemini alliance will primarily operate along the Pacific coast of China and dock at container terminals owned by the member lines. This alliance represents the second-largest grouping in the maritime sector, accounting for 22% of the global shipping market. The largest alliance, Ocean Alliance, includes members such as Taiwan’s Evergreen Marine, France’s CMA CGM, and China’s COSCO Shipping, which collectively hold a 29% share of the market.
