Maersk, Hapag-Lloyd Form Shipping Alliance in Industry Reshuffle -- 2nd Update
18 January 2024 - 12:07AM
Dow Jones News
By Dominic Chopping
Danish shipping giant A.P. Moeller-Maersk and Germany's
Hapag-Lloyd are teaming up to form a new vessel-sharing agreement
from next year, shaking up the global lineup of shipping
alliances.
Following the end to the pandemic-fueled cargo boom, when
freight demand outstripped the supply of ships, the industry has
been left with a surplus of vessels and sharply lower freight
rates. Now, the recent escalation of hostilities in the Middle East
has forced shippers to divert their vessels by thousands of miles
to avoid the Red Sea, where attacks on merchant vessels by Houthi
forces in Yemen continue.
Maersk has paused all transit through the Red Sea and Gulf of
Aden until further notice following an attack on its vessel Maersk
Hangzhou on Dec. 30., while Hapag-Lloyd has previously said it
would avoid Red Sea transits.
The long-term deal announced Wednesday--dubbed Gemini
Cooperation--seeks to boost efficiencies and help accelerate the
companies' decarbonization efforts by delivering a flexible and
interconnected ocean network, they said.
A fleet pool of around 290 vessels will be used in the
collaboration, offering a combined capacity of 3.4 million
containers, with Maersk deploying 60% of the ships and Hapag-Lloyd
40%.
Maersk has a total fleet of around 740 vessels while Hapag-Lloyd
has 264.
"By entering this cooperation, we will be offering our customers
a flexible ocean network that will be raising the bar for
reliability in the industry," Maersk Chief Executive Vincent Clerc
said. "This will strengthen our integrated logistics offering and
meet our customers' needs."
The two companies will target schedule reliability of above 90%
once the network is fully phased in, they said.
As a result of the agreement, Hapag-Lloyd will leave the THE
Alliance that it currently participates in with Korea's HMM,
Singapore's Ocean Network Express and Taiwan's Yang Ming at the end
of January 2025.
Maersk previously said that its 2M alliance with Mediterranean
Shipping Co. would end in January 2025.
The 2M and THE Alliance are two of the largest shipping
alliances currently operating, with a third called Ocean Alliance
comprising CMA-CGM, Cosco Group, OOCL and Evergreen.
Shipping alliances have long been used as a way for container
lines to offer broader geographic coverage while bringing costs
down, but Wednesday's deal should just be seen as a change in
partners rather than an incremental positive in industry
consolidation or industry structure, analysts at Barclays said in a
note.
"We see a rapidly evolving industry dynamic with a rearranging
of deck chairs following the dissolution of the 2M alliance in
January 2025. We remain of the view that the industry structure
remains highly competitive with a persisting lack of capacity
discipline," Barclays said.
The agreement comes at time of mounting challenges for the
shipping industry. After riding the wave of booming trade and
record profits from a surge in demand for goods during the
pandemic, freight rates have nose-dived, making many sailings
across the big ocean trade loss-making and prompting shipping lines
to cut sailings, cancel port calls and slow their sailing speeds to
conserve fuel.
Maersk is already moving to cut more than 10,000 jobs from its
workforce, which stood at 110,000 at the start of last year, as it
seeks $600 million in savings. It reported that freight rates fell
58% on year in the third quarter and were down 90% from their peak
during the pandemic. Revenue in its main shipping business fell 56%
on year to $7.9 billion in the most recently disclosed quarter
ended September 2023.
Overcapacity has also been dampening freight rates after
container lines went on an ordering spree during the pandemic to
move record amounts of cargo.
"Despite Red Sea disruptions impacting near-term container spot
rates, the industry is carrying significant oversupply, sea freight
volumes in November were just 5% higher than 2019 while container
vessel capacity is just over 20% higher than 2019," Barclays
analysts wrote.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
January 17, 2024 07:52 ET (12:52 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Hapag-Lloyd (TG:HLAG)
Historical Stock Chart
From Apr 2024 to May 2024
Hapag-Lloyd (TG:HLAG)
Historical Stock Chart
From May 2023 to May 2024