The freight rate escalation has peaked as carriers look beyond the current Red Sea driven capacity shortage to the post-Chinese New Year slack. After 8 consecutive weekly hikes since the end of November that raised the SCFI by 126%, the weekly gains have slowed down. Despite a widely expected correction, freight rates are still expected to retain most of its recent gains after the Chinese holidays as the shortage of both vessel capacity and container equipment would still persist.
Maersk and Hapag-Lloyd’s announcement on the formation of the new Gemini Cooperation will trigger a fresh round of competitive reactions from their rivals but the full impact of this will only be played out in 2025. The preliminary service network announced by the Gemini partners offer limited direct port-pair coverage compared to the OCEAN Alliance and on the Transpacific routes, the Gemini coverage would be inferior to the current THE Alliance offering.
Linerlytica
Alliance revamp in 2025 set to disrupt liner market balance
The Gemini Cooperation formed by Maersk and Hapag-Lloyd will create the 3rd largest global container shipping alliance in January 2025, behind the Ocean Alliance and MSC/Zim partnership, while THE Alliance will be relegated to 4th position. Although there are speculations about a potential break-up of the OCEAN Alliance, the agreement between CMA CGM, COSCO and Evergreen is fixed for a minimum of 10 years from April 2017 and the partners will need to give 12 months advance notice to withdraw and notice may not be given prior to March 2026 unless there is a material change in the partners’ ownership status or one of the partners become insolvent. THE Alliance had similar provisions but allowed its members to give 12 months notice after April 2023, which Hapag-Lloyd utilized in order to withdraw prematurely from the arrangement that was supposed to operate until 2030. This leaves the remaining members of THE Alliance with limited options to fill the gap left by Hapag-Lloyd’s imminent departure and they will operate at a sub-optimal scale in 2025 until the imbalance can be redressed.
Weekly/Monthly Market Pulse: US$1,500/US$1,800 per year