On 17 January, carriers Maersk and Hapag-Lloyd surprised the shipping industry with news about their new agreement, the Gemini Cooperation, set to commence in February 2025. With this assessment, Kuehne+Nagel provides an overview of the coming alliance and what it means to the shipping industry.
After Maersk and MSC announced they no longer wish to extend the 2M Alliance, analysts anticipated changes in the market would occur. Although the agreement between Hapag-Lloyd, ONE, HMM and Yang Ming under THE Alliance has yet to end in 2030, the German liner decided to part early.
While a thorough analysis of the Gemini's network will only be possible once the carriers reveal their vessel schedules, the market is already painting an outlook of what could come.
Alliances are mainly vessel-sharing agreements meant to facilitate and boost operating carrier services on specific trade routes. Currently, the three leading alliances (2M, THE Alliance and Ocean Alliance) dominate over 90% of services on specific trade lanes.
The first alliance of the three, the 2M Alliance, was established in 2015 and is set to terminate in February next year. With Hapag-Lloyd entering its new agreement at that time, the structure of the THE Alliance is bound to change.
What do we know so far about the new cooperation?
The operational agreement will initially run for three years until 2028 and will automatically be extended by another year if the partners agree. However, both Maersk and Hapag-Lloyd expressed their wish for the Gemini Cooperation to be long-term.
Out of the carriers' combined capacity, the Gemini will have a fleet of around 290 vessels with a total capacity of 3.4 million TEU. This capacity will be divided between each carrier as follows: Maersk will deploy 60% and Hapag-Lloyd 40%.
Concerning trade routes, the cooperation will comprise 26 mainline services covering seven trades:
- Asia / US West Coast (4 services)
- Asia / US East Coast (5 services)
- Asia / Middle East (one service)
- Asia / Mediterranean (3 services)
- Asia / North Europe (4 services)
- Middle East - India / Europe (4 services)
- Transatlantic (one service)
The Gemini cooperation sets to use the hub and spoke model, which automatically leads to fewer port of calls, shorter transit times on main services, and, at the same time, more port-to-port connections served in transhipment. This could make achieving a high on-time performance a bit tricky since transhipments rely on the reliability of the connecting vessel.
Schedule Reliability above 90%
In a press conference, the two CEOs, Hapag-Lloyd's Jansen and Maersk's Clerc, highlighted some of the goals the cooperation seeks to achieve.
The most striking is their plan to deliver a schedule reliability of above 90% once the network is fully phased in. The market will undoubtedly pay close attention to the achievement of this ambition.
"To improve reliability, the new cooperation will most likely rely on the main terminals under Maersk's ownership and management. Through the hub and spoke model, the two shipping lines will aim for efficiency gains and higher service quality," says Paolo Montrone, Kuehne+Nagel's Global Head of Sea Logistics Trade.
Using vessel schedules from carriers, seaexplorer captures actual arrivals and vessel delays on main trade lanes globally.
Taking the months of September, October and November 2023 as examples to showcase the schedule reliability of Maersk and Hapag-Lloyd on the Asia-North Europe trade, we find they have quite a gap to fill.
In November, Maersk had a 61% on-time performance, while Hapag-Lloyd had 45% for Asia-North Europe. Globally, Maersk's performance reached 71% and Hapag-Lloyd's 58%.
Kuehne+Nagel has been publishing regular schedule reliability reports for container vessels globally. A summary of this analysis is available monthly on Sea News. You can check the latest report with December 2023 data through this link.
How would the Gemini Cooperation compare to others in the market?
Based on available data, once the new agreement is in operation, it would be the second largest alliance raking after the Ocean Alliance. Analysts further forecast its combined capacity on the major trade routes will be slightly higher than that of MSC.
Future of THE Alliance
The creation of the Gemini Cooperation means Hapag-Lloyd will leave its membership in THE Alliance as of early 2025. It remains unknown what steps carriers HMM, ONE and Yang Ming will take to fill the vacancy.
In the meantime, members of THE Alliance published a joint statement reassuring the market of their "unwavering commitment to maintaining a robust cooperation throughout 2024."
When HMM joined THE Alliance in 2020, the plan was that the agreement would run until 2030. Nonetheless, members have the right to withdraw from the alliance with 12 months' notice.
It is important to note that while Hapag-Lloyd was a key member, it was ONE that supplied the larger capacity. ONE's capacity share is 38.7%, while Hapag-Lloyd provides 26.2%.
Kuehne+Nagel expert opinion and outlook
While THE Alliance promised robust cooperation until the end of 2024, it does not mean that it will not gradually restructure and reorganise its services throughout the year.
THE Alliance memberships, and maybe that of other alliances, could also witness changes as carriers attempt to reorganise their position among competitors.
As soon as the Gemini Corporation publishes common schedules for their newly created services, seaexplorer will inform its users about the setup of this new network and port-to-port options.
Furthermore, through schedule and vessel tracker data, Kuehne+Nagel will closely follow up on the carriers' promises made to customers in terms of emission reductions and service reliability and how fast they are able to meet their ambitions.
