The following is an archived collection of our weekly insights through the month of January. Those who had signed up to our Interlog Insights newsletter received each week’s update to their inbox on the original release date. If you like what you see below, please feel free to sign up yourself to get these updates right as they come!

This month's insights

Week 3 - Originally released January 19

Insight: Maersk to Partner with Hapag-Lloyd in 2025, Post-2M

Shipping company extraordinaire A.P. Moeller-Maersk has found a new mate in Hapag-Lloyd.

Maersk and German-based carrier Hapag-Lloyd have announced a new vessel-sharing agreement (VSA) which will go live next year following the termination of Maersk’s fabled 2M Alliance with Mediterranean Shipping Co. (MSC). The 2M Alliance will end in January 2025.

A shipping line shuffle was expected after Maersk and MSC announced last January that the two would be dissolving their alliance and mutually parting ways with one another. They reasoned the split was a result of them pursuing individual, incongruent, strategies.

While MSC, the world’s largest ocean carrier, has enough existing capacity (as well as an insane orderbook of new ships) to sail alone without a partner, Maersk has been seeking a replacement to maintain its network strength. It appears Hapag-Lloyd is the new match Maersk has been looking for.

“Gemini Cooperation” to go live February 2025

The proposed VSA between Maersk and Hapag-Lloyd will be coined as the “Gemini Cooperation” and is targeted for rollout in February 2025, immediately following 2M’s conclusion.

According to Maersk, the cooperative agreement will cover prominent global trades: Asia-North Europe; Asia-Mediterranean; Middle East-Europe; Middle East and India-Mediterranean; Asia-Middle East; Asia-U.S. East Coast; and Asia-U.S. West Coast.

The network will comprise of 26 mainline services, supported with dedicated feeder services to and from transshipment hubs operated by the carriers. These feeders, which Maersk calls shuttles, offer connections with flexible capacity between these hubs and main seaports.

The Denmark-based carrier touts this VSA as a best-in-class ocean freight network, while also penning Hapag-Lloyd as a like-minded partner that shares its ambition.

The two carriers are aiming for schedule reliability of above 90 percent once the network is fully phased in.

Between now and January 2025, Maersk says it’s committed to maintaining service cooperation with MSC through the remaining year of the 2M Alliance. The carrier is expected to share more updates on the Gemini Cooperation network, including sailing schedules, during the course of 2024.

As Maersk closes the door on 2M next year, Hapag-Lloyd will be exiting from the world’s other large shipping alliance, THE Alliance, whose other members are South Korea’s HMM, Japan’s Ocean Network Express, and Taiwan’s Yang Ming.

According to Alphaliner, Hapag-Lloyd is currently the world’s fifth-largest carrier with an estimated 1.98 million TEU capacity, or a 7 percent share in the shipping line market. Maersk is the second largest, with an astounding 4.16 million TEU capacity, or a near 15 percent market share.

MSC has enough capacity to sail alliance-free

While Maersk and Hapag-Lloyd are industry-leading players, there’s even a bigger fish in the ocean by the name of MSC—the other half of 2M.

Unlike Maersk, the Switzerland-based behemoth is widely expected to stay alliance-free following 2M’s dissolution. As the world’s largest carrier by quite a margin, MSC possesses a jaw dropping 5.64 million TEU capacity—representing a 20 percent share in the market.

During the pandemic’s shipping boom—the golden age of carrier investment—MSC aggressively expanded its ocean capacity. The legacy of this conquest continues developing as the carrier has an orderbook (newbuild) capacity of 1.8 million TEUs. This number alone nearly matches Hapag-Lloyd’s existing capacity.

That said, while MSC zeroed in on ocean, Maersk invested its share of growth and profit into becoming an end-to-end logistics provider. This difference in strategy was the primary reason for the two companies not renewing their 2M Alliance.

Webinar: Canal updates, Chinese New Year prep!

Watch January’s webinar for the latest on the Panama and Suez canals. Our team of experts also discuss the importance of shippers choosing the right service option for their cargo.

Insight: Some Ocean Carriers Pause Asia-Europe Contracts Due to Red Sea Uncertainty

The uncertainty with the disruption in the Red Sea is leading some ocean carriers to pause negotiations on Asia-Europe contracts.

One ocean carrier who has spoken out about this is Hapag-Lloyd. A spokesperson for Hapag-Lloyd told the Journal of Commerce that long-term deals will not be offered “until the Red Sea situation settles.”

Hapag-Lloyd says the lack of clarity in how long the diversions from the Red Sea will be required, the unknown impact of available equipment and the impact ships arriving out of windows will have on port function, as factors for the pause.

Will other ocean carriers follow suit?

Maybe, maybe not. When speaking with a carrier contact of ours, they say they are still actively negotiating contracts with customers in regards to the Asia-Europe lane and with U.S. import contracts.

There may be some instances where after issuing an initial bid, some customers may choose to hold off a bit and extend their bid, in hopes there will be a clearer picture on whether rates will stabilize or be reduced.

No one knows when this uncertainty in the Red Sea will subside. As such, ocean carriers are continuing to re-route their ships around the Cape of Good Hope in southern Africa for the foreseeable future.

Will contract negotiations on other trade lanes be paused?

Contract season has already started for some and will continue into the next months. It is possible that other trade lane contract negotiations may be paused, which is something that we are continuing to monitor and assess.

Want more information on this topic? Check out our webinar from this past Wednesday. We discussed updates regarding the Suez Canal/Red Sea and Panama Canal, and the impacts it has on rates/capacity and re-routing options.

Week 2 - Originally released January 12

Insight: The Deja-vu-ables: Three Past Issues Resurfacing in 2024

“History never repeats itself, but it does often rhyme,” said famous American author Mark Twain.

Last week, we recapped significant supply chain events in 2023. From West Coast labor strife to the world’s largest ocean carriers announcing their split, last year had some unique turns for the industry. While it’s a fact that every year is disparate, common themes often transcend the calendar. Issues that arise in front of the industry usually, unnervingly, rhyme with those overcome in the past.

The following are three issues that will likely surface again in 2024.

1: External events beyond market control

All things considered, 2023 was mostly a gap year when it came to trade disruptions beyond industry control. The clock has to be winded back to 2022 for a better look at how external events interfere with the market.

The global pandemic was undisputedly the king of chaos. This notorious title will likely live into the distant future as well (fingers crossed that an event even more disruptive will never materialize). This indiscriminate event compromised supply chains worldwide—from the bustling mega ports in China to the hardy rail ramps in the U.S. Midwest. No corner of the world was immune to Covid-related calamity.

A great shipping crisis was born, characterized by stifling port congestion, dastardly delays, tightened capacity, and container rates as high as the price of a new sedan. Historical demand further compounded these deteriorating conditions. The “unflappable”, pre-pandemic, supply chain that shippers once knew vanished into dust.

External events in 2024 aren’t repeating the history of this crisis two years ago, but they certainly rhyme. Existing turmoil in both the Panama and Suez canals are indefinite and out of the industry’s control. The former is compromised from an unrelenting drought, while the latter is engulfed in a geopolitical fracas.

The impact on the market can already be seen. Surcharges and restrictions are littered at the Panama Canal, squeezing space and raising transportation costs. While service adjustments to avoid the Suez Canal have led to longer transits and higher rates. The routing change has also required ocean carriers to allocate more vessels in their weekly rotations—tightening available capacity.

2: An awkward contract season

The present canal woes are leading right into the industry’s annual contract season. Every year, shippers and ocean carriers converge to settle on contracted space commitments for quasi-fixed rates. The season typically runs until April 1, the start of fiscal Q2.

Contract negotiations are imminent every year. However, the issue for the 2024 cycle, which draws parallels to previous years, is how shippers navigate their decision making amid market uncertainty.

Last year had its own uncertainty, however shippers were the ones in the driver’s seat. Rates throughout Q1 2023 were at their lowest in years, while overall market conditions were soft. After being ruled by the whims of ocean carriers in 2021 and 2022, some shippers sought best-bargain revenge and locked into contracted rates at the start of 2023.

While others were more patient and waited. They banked on the market softening even more, which would lower spot rates tremendously. And they were right. Those who postponed signing contracts after April 1 took advantage of a continuing dormant state of freight.

2024 rhymes with the uncertainty of last year, but this time around, the dynamic is different. It can be argued that carriers are the ones in the driver’s seat.

With canal issues tightening the market, carriers have used this as an opportunity to go on the offensive. On New Year’s Day, major carriers implemented aggressive general rate increases (GRIs) across the Asia-U.S. trade. In extreme cases, 40-foot units saw a $1,000 bump. On top of this, another wave is expected Jan. 15 for the second half of the month. Rates are nearly three times higher than last January’s levels.

Shippers are now in a different position this contract cycle. Do they bite the bullet now on elevated rates in case the market tightens further? Or do they wait and gamble on the market softening after April?

This important decision comes down to assessing risk.

For starters, the canals. The Panama Canal is likely compromised through early 2024. While stakeholders have expressed optimism that the waterway will improve, the canal’s restrictions, in some way or form, will remain in play for the next few months. However, the Suez Canal has a more intriguing question mark. Container shipping has completely withdrawn from the canal to avoid indiscriminate rebel attacks on their fleets. The actions of the assailants revolve around aggravated conflict in the Middle East. The situation transcends global trade and has captured the attention of world governments, including the U.S., who have voiced their intentions of countering this growing threat—whether that’s drone strikes on rebel targets or military convoys to escort marine traffic.

Heading into contract season, shippers need to weigh the indefinite uncertainty with the canals into their decision making. Their conditions will directly play into the state of the market. That said, it’s clear most shippers will be on the fence this contract season—unclear whether to commit now or wait it out.

An effective strategy, which emerged from the pandemic shipping crisis, is a hybrid approach of awarding freight volumes. Shippers will commit some of their annual volume to contracts, while allocating the remaining amount to the spot market.

3: Labor uncertainty

Speaking of contracts, on Sep. 30, the existing labor contract for 45,000 unionized dockworkers along the East and Gulf coasts will expire. Maritime employers (ports and ocean carriers) and the International Longshoreman’s Association (ILA) are expected to start talks earlier in the year to reach a new deal before this deadline.

ILA leadership have publicly announced that they’re seeking a landmark contract and informed union members to prepare for a strike on Oct. 1 if the two sides fail to produce a deal.

The labor situation harkens back to one that took place on the West Coast last year. While an agreement was ultimately reached last June, contract negotiations lasted for 13 months. In other words, West Coast dockworkers were without a labor contract for over a year.

For the first half of 2023, this protracted period of labor uncertainty stirred anxiety in shippers. Many rerouted their cargo away from West Coast ports, opting for East or Gulf ones instead.

While no mass-union strike ever occurred, the prolonged impasse casted a shadow over the West Coast and undermined shipper-confidence in its port system.

2024 now shifts the focus to the East and Gulf coasts. Stakeholders are admittedly nervous ahead of the two sides beginning negotiations, as last year’s West Coast saga remains a clear memory.

Labor uncertainty, a defining theme of 2023, is back on the menu for 2024.

Industry News Around the World: Industrial Action at Australian Ports Continue

Australian shippers are facing potential (and, for some, continued) delays and disruption due to ongoing industrial action at DP World Australia’s four terminals (Sydney, Melbourne, Brisbane, and Fremantle).

This industrial action has been occurring since October 2023 and has cost Australia $900 million USD ($1.3 AUD) in cargo delays, transport costs and lost orders, per the Journal of Commerce. Industrial action is expected to continue until at least Jan. 15 but could continue on.

Maersk and CMA CGM have been skipping calls at the gateway ports (including Sydney and Melbourne) in an effort to maintain schedule reliability instead of having the ships deal with extended waits before they dock.

The dockworkers at DP World Terminals are asking for a 27.5 percent pay increase and salaries around $130,000 AUD.

As of now, the Australian government has not yet intervened, but some industry stakeholders are “urging” the government to step in.

Check out our other content!

Pay a visit to our website for a closer look at other InterlogUSA content, including recordings of past webinars, podcasts, and blogs. Also, follow InterlogUSA LinkedIn and Facebook pages for even more updates and content!

Week 1 - Originally released January 5

Insight: 2023 Supply Chain Rewards

The following are some of last year’s top supply chain events, and recipients of Interlog’s 2023 Supply Chain Rewind Awards!

The World Peace Award

Last June, West Coast unionized dockworkers secured a new six-year labor contract following protracted negotiations for over a year. The talks begin in May 2022, the previous contract expired in July 2022, and, from there, it was an uncertain situation, punctuated by shipper anxiety.

All things considered, it was a happy ending. The West Coast’s labor force seems happy with the new deal, maritime employers seem happy to see their workers happy, and shippers seem happy that maritime employers seem happy to see their workers happy.

Over the remaining months of 2023, the West Coast has made promising inroads towards recapturing lost market share. While it wasn’t a fatal bleed, the ports lost out on some discretionary cargo to their East and Gulf coast contemporaries during the negotiations.

However, with a new contract in place, the West Coast is ready for 2024. And, in terms of labor uncertainty, the East and Gulf coasts are the ones up for negotiating with their dockworkers this year.

Here’s to hopefully quick labor peace in 2024.

The “I hope this never happens again” Award

For the second straight year, low water levels plagued the usually mighty Mississippi River ahead of the annual U.S. harvest season—the country’s Super Bowl for agriculture exports.

In September and early October, the situation on the river was dire. As a result, downbound barge rates skyrocketed. For reference, on Sep. 19, grain barge rates from Memphis were $1,689. Right now, they’re only $272. Throughout the chaos, barge lines were reporting transit delays of up to three days.

The river’s low levels are squeezed capacity and forced load restrictions.

Frustrated agriculture exporters had their hands tied. Barge is the cheapest mode to move low-value, high-volume, cargo, like agricultural commodities, from the Midwest to ports of exit. However, when Mother Nature invokes her wrath twice in back-to-back harvest seasons, the otherwise friendly mode transforms into a volatile enterprise.

Anxious shippers resorted to other, costlier, options, such as truck or rail, to ensure their perishable products made it to their overseas customers in time.

As a sign of good faith for 2024’s harvest season, it’s rumored that agriculture exporters have hired choreographers to successfully perform a collective, industrywide, rain dance—if necessary. Let’s hope this isn’t necessary.

The “It’s not you, it’s me” Lifetime Achievement Award

Our hearts go out to anyone who experienced a breakup in 2023. Just know, no matter how painful this may have been, the world’s two largest ocean carriers went through the same heartbreak. Isn’t that comforting to know?

At the start of 2023, MSC and Maersk announced that their 2M Alliance would be terminated in 2025. In one year, this fabled vessel sharing agreement will no longer exist, expiring to dust ten-years after it was signed.

The carriers reasoned the split as a pursuit of individual strategies. “It’s not you, it’s me.”

During the pandemic-era shipping crisis, both carriers were empowered by growth and inspired by reimagined strategy. The two are no longer on the same page with one another.

MSC continues to double down on ocean freight capacity, a metric it already dominates the market in, while Maersk aims to evolve into a complete end-to-end logistics provider.

Honorable mentions

Trend of the Year: To the growing trend of U.S. businesses moving production and sourcing from overseas to closer markets, like Mexico or South America.

Port Investment of the Year: To the Port of Virginia for investing $1.4 billion towards semi-automation, facility expansion, and sustainability.

The Now You See Me, Now You Don’t Award: To last year’s recurring theme of blank sailings on transpacific lanes.

The Big Belly Award: To last year’s bloated inventory levels in the U.S.

The Mama’s Boy Award: To U.S. Customs and Border Protection inspecting more than one billion stems of cut flowers ahead of last year’s Mother’s Day.

Insight: This Week's Current Events

Chinese New Year is around five weeks away, beginning Feb. 10.

Reminder: Factories will close around February 9th and will not resume shipping, loading trucks, etc., until at least February 15th, perhaps until the 20th.

Red Sea Update: On Jan. 2, Maersk once again suspended its vessels going through the Red Sea due to a ship being attacked over the weekend.

As of Jan. 5, Maersk, as well as other carriers, has continued to pause vessels going through the Red Sea, and instead, will be going south around the Cape of Good Hope for the foreseeable future. This continues to be a fluid situation.

Reminder: Talk with your forwarder(s) about your options. If you would like to talk to one of our experts to help assist during this situation, please reach out.

Insight: Online Activity on the Rise

Take the good with the badonline shopping activity has been increasing, but with that comes an influx in potential returnsa costly problem for retailers.

While final numbers have yet to be posted, e-commerce sales this holiday season have been predicted to increase by 7 percent ($273.7 billion), per the National Retail Federation.

CBRE, a company that shares insights and data on a variety of topics, calculates that the maximum value for this holiday season’s returns of online purchases could reach $82.1 billion.

There’s been talk that more will start charging for returns, which would certainly cause some outrage. Interestingly enough, more than 40 percent of retailers do charge mail-in return fees.

Retailer Amazon has recently started to charge $1 for return purchases to a UPS Store when a Kohls, Amazon-owned Whole Foods, or Amazon Fresh store is closer to their delivery address, as CBS News reports.

Still, many retailers are finding and creating easier ways for consumers to return products.

Blog: Rediscover the top supply chain events in 2023!

Check out our bog recapping top events that occurred in international shipping and the supply chain last year. 

What did you think?

In addition, please email us at support@interlogusa.com with any news or topics you’d like our experts to cover in future issues!