News / Shipping alliance shake-up will make waves during new contract season

© Andrii Yalanskyi

With the ocean shipping alliances set to undergo major upheaval, the upcoming contract negotiation season will be different, because of “big unknowns”, according to the director of the Global Shipper’s Forum, James Hookham. 

In February, ocean carriers Maersk and Hapag-Lloyd will leave their respective groupings, the 2M and THE Alliance, to form the Gemini Cooperation. 

The 2M’s MSC will remain alone, THE Alliance will comprise just HMM, ONE and Yang Ming, while the Ocean Alliance of CMA CGM, Cosco, OOCL and Evergreen remains unchanged.

This leaves shippers eyeing long-term contracts questioning where to sign and wondering if further alliance shifts are yet to be announced. 

Peter Sundara, global head of ocean freight for a large BCO in Singapore, said: “Shippers would need to reassess which alliance to use, as previous contacts and connections might not remain within the same group. They should be prepared to work with different carriers and adapt to their operations and customer service.” 

He believes that THE Alliance’s ability to capture market share “will be limited”, and explained: “They seem to be struggling to find a partner to replace Hapag’s significant role.

“Even if they attract niche carriers like Wan Hai, TS Line, Sea Lead or PIL, it won’t be enough to bridge the substantial gap [left by Hapag].” 

Indeed, maritime research consultancy Drewry told The Loadstar: “THE alliance will have a weak transatlantic network next year – only one weekly service is expected. THEA carriers may, therefore, lose some customers or have to be aggressive on rates to retain them.” 

The analyst also noted that MSC “could have to be more aggressive on prices to retain market share on some trade routes”. 

Although the Geneva-based carrier is taking delivery of a record amount of new capacity, “its Asia-US east coast and Asia-Med coverage is expected to be less frequent and widespread than other alliances following the departure of Maersk”, explained Drewry. 

But, according to Mr Sundara, MSC is well-positioned to handle the loss of its 2M partner, thanks to “its financial strength and capacity”.  

He told The Loadstar: “If needed, MSC can seek slot-sharing arrangements with other carriers and will continue investing in new vessels to expand its market share. Unlike Maersk, MSC prioritises vessel acquisition and is capable of thriving independently of major alliances.”

Mr Hookham agreed: “I think they will be big enough to go it alone.” 

For the new Gemini, Maersk and Hapag Lloyd have targeted 90% schedule reliability – which could be attractive for shippers amid the market volatility.  

But Mr Hookham warned: “Maersk CEO Vincent Clerc said last week he expected disruption to continue through 2025. Given this, it is hard to see how the commitments to 90%+ reliability can be delivered. 

“On this basis, Gemini wouldn’t seem to have any particular advantage over other alliances or carriers.” 

And Drewry told The Loadstar: “Gemini will not have the best east-west network among the alliances, in terms of frequency, next year.” 

Its analysis of the alliance carrier fleets showed the Gemini Cooperation will have about 21 east-west loops, way below the 40 or so of the Ocean Alliance members. 

“Maersk and Hapag-Lloyd intend to position their new alliance as having the most reliable network, using an unproven hub-and-spoke model, but we will have to wait and see whether it can be delivered,” said Drewry. 

“Hub-and-spoke-based networks are very difficult to run reliably and tend to be vulnerable to disruption. Some shippers that are cautious on potential hub-and-spoke delays have questioned whether Gemini is the right choice in terms of reliability and potential transition disruptions,” it added.  

However, Mr Hookham pointed out that due to the continued diversion of ships away from the Red Sea, “carriers will walk away from contractual commitments and prices for even modest rises in spot prices”. 

“So, do ocean contracts amount to anything any more?” he questioned.