Hapag-Lloyd, Maersk alliance may lower freight rates but slow delivery

By Nona Pelletier of RNZ

A collaboration between two of the world’s largest shipping companies could drive down sea freight prices, but the length of time for goods to reach their destination may be longer.

Hapag-Lloyd and href="https://www.nzherald.co.nz/business/companies/agribusiness/maersk-puts-its-stamp-on-nz-supply-chain-with-150m-new-facility-at-ruakura/T2VMJ5E5QRDT5KNKFT6BEVPHKU/" target="_self" rel="" title="https://www.nzherald.co.nz/business/companies/agribusiness/maersk-puts-its-stamp-on-nz-supply-chain-with-150m-new-facility-at-ruakura/T2VMJ5E5QRDT5KNKFT6BEVPHKU/">Maersk’s Gemini Cooperation initiative will come into effect on February 1 and cover the ocean freight network on East-West trades.

Forsyth Barr head of research Andy Bowley said New Zealand exporters were likely to see more immediate benefits from improved stability in the Red Sea, with increased shipping capacity driving down prices.

“If we start to see changes in the services, say, because the Red Sea has become a safer place to transit and go through the Suez Canal, as opposed to around the Cape of Good Hope, you may see some knock-on impacts with more capacity coming into this market and therefore lower shipping rates,” Bowley said.

Hapag-Lloyd and Maersk's Gemini Cooperation initiative will come into effect on February 1. Photo / Malisha Kumar

In the meantime, Gemini was targeting an on-time rate of 90%, compared with recent service reliability rankings, with on-time rates of around 55% for Hapag-Lloyd and Maersk.

Gemini said in a statement its operator-controlled modern fleet with dedicated teams would deliver a leaner service, with the average number of stops a container made between the origin and final destination decreasing significantly.

“With ports being a major source of unreliability, this will reduce the opportunities for disruptions along the way and improve reliability,” it said.

Bowley said the alliance could improve shipping service reliability, which had been low post-Covid for all global lines and elevated sea freight rates may subside.

However, the changes could result in longer shipping times, he said.

“Increased transhipments for cargo to and from New Zealand because of Gemini’s hub-and-spoke strategy could increase delivery times. Even if the services are more reliable, they could take longer,” Bowley said.

He said the changes could also have a negative effect on Mainfreight’s air and ocean business.

“The prospect of lower sea freight rates, or at least a normalisation of rates, is a negative for Mainfreight (MFT)’s Air and Ocean business,” Bowley said, with high freight rates better for MFT’s bottom line.

“It’s the middle man in the transaction. So it doesn’t have aircraft itself. It doesn’t have seafaring vessels. So it’s very much reliant on the rates that it’s able to charge its customers, and what it receives from its suppliers.

“In essence it’s able to make more money when rates are higher, typically, than when rates are lower, so it tends to lose out if rates fall to any great extent.”

- RNZ