Container Shipping Alliance networks taking shape : Drewry
LONDON : We know more about what the landscape for East-West container services will look like in 2025 this week, but there is still plenty of uncertainty with the final network to be dictated by external events.
The reshaping of container alliances and their East-West liner schedules for 2025 took a big step forward this week with the release of a second draft network plan by the Gemini Cooperation partners, Maersk and Hapag-Lloyd, a new list of services for THE Alliance (ONE, HMM and Yang Ming) – which is to be rebranded Premier Alliance when it formally starts in February 2025 – and a fresh network brochure from the soon-to-be independent again MSC.
On top of that, there was news of slot exchange agreements between MSC and Premier on Asia-Europe, and between MSC and Zim for the Transpacific.
Earlier this year, Drewry hosted a webinar to consider the future competitive positions of liner alliances post-Gemini, during which we correctly identified new partnership opportunities for MSC and the remaining THE Alliance members, as well as between MSC and Zim.
The defection of Hapag-Lloyd to Gemini from THE Alliance put the left-behind trio in a difficult position to fill the capacity shortfall, but we viewed MSC as being amenable to a looser cooperation with them that would enable it to enhance its service offering, without constraining it to a more rigid alliance deal, such as it had with Maersk in 2M.
The MSC and Zim agreement was easier to predict as the two carriers already had pre-existing co-operation agreements in the Asia-WCNA and ECNA trades (the latter via 2M) as well as a range of other joint services connecting South Asia with the East Mediterranean, the East Med with North Europe, and East Asia with Oceania.
Were it any other two carriers of radically different sizes, such a large-scale cooperation across multiple trades would make us think a take over approach was imminent. The reason we dismiss it as a possibility here is MSC’s historic policy of organic growth and Zim’s de facto status as a strategic national asset for Israel.
While the flurry of news on alliances and network plans does answer some of the questions we raised in our previous presentation, including the most pressing ones facing carriers in THE Alliance/Premier, there are still many more outstanding.
This is because, with no end in sight to Houthi attacks on shipping and Red Sea diversions, both MSC and the Gemini carriers thought it prudent to create two versions of their new network plans, offering up Suez and Cape of Good Hope routing contingencies.
During a meeting ahead of the press release, senior members from both Gemini partners told Drewry that a decision will be made in October as to which version will go live from February next year.
Neither would be drawn on which version they think is the more likely to be activated, nor would they give a timeline for the expected full-scale resumption of Suez Canal transits. But with one Gemini representative saying that there is “no credible end in sight” to the diversions and that they will only consider Suez when it is completely free from the risk of attack, we can confidently assume that the Cape of Good Hope version is the current default network setting.
Adding to the uncertainty of what the finished alliance products will look like, the Premier Alliance didn’t provide alternatives in its initial release, but did say that it will update to include rotations routing via the Cape of Good Hope “in the coming days.” At the same time, its list did not include any details for Transatlantic services, which it says will be updated separately.
The Ocean Alliance (CMA CGM, Cosco and Evergreen) hasn’t announced any changes to its existing “Day 8” network, effective since April 2024.
Upon review of both network versions from Gemini and MSC, aside from routing options, the alternative versions are fundamentally very similar. The port coverage is almost identical, although a handful of port calls are dependent on particular route choices, while the sequencing of calls occasionally differs for the same service.
MSC has the same number of weekly East-West services, 34, in both versions, with the Swiss carrier reporting that it will offer approximately 100 more direct port pairs via Suez than via the Cape of Good Hope, around 1,900 versus some 1,800, respectively.
Gemini’s number of mainline services does differ between the two versions: 27 in the Suez setting and 29 in the CoGH setting. This is the result of not including one mainliner Asia-Suez-USEC “TP17” loop from the former schedule plan, and by adding three Mediterranean-Jeddah connections to the latter setup.
Under the Cape of Good Hope configuration, Gemini said that it would require 341 vessels aggregating 3.7 million TEUs, which is 41 more ships than in the Trans Suez option. It translates to about 9% greater teu capacity demand for CoGH versus the Suez option, and indeed the original launch plan.
In January the plan was for 290 vessels (3.4 mteu) to operate on 26 mainline services with 32 feeder shuttles in Europe, Middle East, Asia and the Gulf of Mexico. The number of shuttles has been paired back to 30 in both Suez and CoGH versions.
The main differences in the alternative network versions of both Gemini and MSC can be found in the transit time matrices, with Cape of Good Hope configurations unsurprisingly extending lead times for shippers
The radical hub and spoke model unveiled at Gemini’s launch remains a key feature, irrespective of the routing plan. The two partners believe that designing mainline services with fewer direct port calls with controlled hubs is the best way to raise service standards, and they have maintained the commitment to 90% on-time service reliability once all ships are fully phased-in (around early May 2025).
Gemini told us that adding some days to transit times from the original brochure was necessary to ensure its reliability target is achievable, which they said has received strong backing from customers.
In terms of execution of the Gemini network, Drewry was able to get confirmation that there won’t be a dedicated centralised team, rather it will be carried out by respective regional teams with joint committees. Additionally, there will be no mix and match of services with all loops deployed by individual carrier-operated tonnage. This is for accountability and efficiency reasons, we were told.
Now that we have a bit more clarity on the future East-West container network, we can update our competitive analysis previously undertaken in the webinar, once again excluding the South Asia and Middle East connections as they are not universally covered by all carrier groups.
The analysis below only considers the number of loops as details on capacity deployment are still pending. It is also worth noting that some of the services are shared via slot exchange or vessel sharing agreements, so there is an element of double counting. Also, services by alliance carriers that are not part of the alliance framework have not been considered.
MSC’s planned swap slots with Premier (Asia-Europe) and Zim (Transpacific) have put to rest any concerns that it wouldn’t be able to compete with the other alliances on a standalone basis, and will see it overtake Ocean with the most weekly services in the sample of East-West trades from next February, assuming no change to Ocean’s products.
The world’s largest carrier will have a remarkably even spread of services by trade, with a minimum of four (Asia-WCNA) and maximum of seven (Asia-North Europe). It will be the market leader, based purely on the number of mainline loops, in three of the six selected trades: Asia-North Europe (7 loops), Asia-Med (6 loops) and North Europe-North America (6 loops).
For North Europe-North America, the count for MSC includes services to Montreal and the US West Coast, which are out-of-scope for the Ocean Alliance and Gemini, but where member carriers do run services separately.
Despite its slot swap with Zim, MSC will be weakest in the Transpacific where its four Asia-West Coast North America services will be dwarfed by the 11 services from Ocean and 10 from Premier. MSC will be more competitive in the Asia-ECNA corridor, where its six loops will be good enough to rank second behind Ocean.
One could argue that MSC’s position in this analysis is artificially inflated by slot swaps, and that they don’t represent a proper coordinated product with joint scheduling decisions, such as happens with VSA (vessel sharing agreements) or alliances. However, while there does seem to be some exclusions (such MSC not getting access to Premier’s Japan market, and Premier not having use of MSC’s direct calls in Scandinavia and the Baltic), the respective presentations do suggest the agreements are closely integrated and robust.
Ocean Alliance, in contrast to MSC, has a less balanced portfolio of services with a heavy tilt towards the Transpacific, with a market-leading number of loops in both Asia-WCNA (11 loops) and Asia-ECNA (8 loops). Its weak spot is the Transatlantic with only three services covering the North America to North Europe and Med regions.
A full competitive analysis is compromised by the lack of information from the Premier Alliance on its plans for the Transatlantic. However, even without any loops on that trade it has almost certainly cemented its third-place ranking with a minimum of 24 direct East-West services, at least one more than Gemini. Note that we have not included the Asia Hawaii Express (AHX) in the analysis as we think this will be a separate ONE service outside the scope of Premier.
The Transatlantic was not included in the MSC-Premier slot swap agreement, leaving Premier with limited opportunity for cooperation if, as expected, Gemini is a closed-shop. A deal with Ocean Alliance would seem the obvious choice as THE Alliance (the current name for Premier) and Ocean already operate a joint Med-North America loop (variously branded as Amerigo, MEN, ATM1 and AL6). It is not clear if this jointly operated service will continue next year.
At a basic level, Drewry’s analysis shows that, from 2025, there will be two larger networks/alliances (MSC and partners + Ocean) versus two smaller ones (Premier and Gemini), with the former deploying about 30% more weekly loops than the latter.
Gemini comes in fourth in the overall rankings with no comparative advantage in any specific trade when it comes to the number of services, ranking last in Asia-ECNA (either 3 or 2 services depending on network choice), Asia-North Europe (4 loops) and Asia-Med (3 loops).
However, it is clear from speaking with Maersk and Hapag-Lloyd that they are very relaxed about this situation and see the strength of their product as the quality of the service rather than the quantity of mainliners. If they are successful in attaining 90% reliability that will provide a significant marketing edge and will make its competitors have to consider further network adjustments.
Our view
Carriers’ provision of contingency options is welcome news and will assist customers’ planning by letting them know the range of options available to them. Drewry expects the slower and more ship-intensive Cape of Good Hope configurations to be the default setting when the new alliances start operations early next year, but more disruptive events could necessitate further tweaks, such as a prolonged port strike on the US East Coast.
Source : Drewry