<div class="phx-topic abstract-wrapper">With no belly cargo available for flights to China, demand for chartered freighter capacity has risen sharply, along with air freight rates, as relief aid and medical supplies move to the country amid the coronavirus outbreak.</div>

With no belly cargo available for flights to China, demand for chartered freighter capacity has risen sharply, along with air freight rates, as relief aid and medical supplies move to the country amid the coronavirus outbreak.

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<div>Air freight charter rates are rising sharply on the major east-west trade lanes as urgent cargo shipments to China carrying medical supplies and relief aid fill all available space following the suspension of most passenger flights amid the coronavirus (COVID-19) outbreak.The trans-Pacific charter rate for a freighter aircraft, usually about $400,000, reached $800,000 one-way last week. At the same time, chartered air traffic pushed up Europe to China rates by almost 200 percent compared with a week ago, according to Freight Investor Services (FIS).<a>Huge amounts of belly cargo capacity have been withdrawn</a> from the market due to the suspension of...

Air freight charter rates are rising sharply on the major east-west trade lanes as urgent cargo shipments to China carrying medical supplies and relief aid fill all available space following the suspension of most passenger flights amid the coronavirus (COVID-19) outbreak. The trans-Pacific charter rate for a freighter aircraft, usually about $400,000, reached $800,000 one-way last week. At the same time, chartered air traffic pushed up Europe to China rates by almost 200 percent compared with a week ago, according to Freight Investor Services (FIS). Huge amounts of belly cargo capacity have been withdrawn from the market due to the suspension of passenger flights to China from around the world, believed to involve more than 70 airlines. That has quickly led to an increase in demand for chartered freighters carrying mostly relief aid and medical supplies. Frankfurt-Shanghai rates hit $2.78 per kilogram, which FIS said was a jump of 193 percent compared with a week ago. “A dramatic boom in charter traffic has been categorically reflected in the explosion of charters from Europe to China,” FIS noted Monday in its weekly update. “It will certainly be interesting to see how sustained this jump is as inbound charter traffic drops off.” “Given we can assume a large proportion of this traffic will be relief shipments, the costs will flow through to the shipper with someone down the line shouldering the bill,” FIS added. “All the while, trans-Pacific charter rates were hovering from anywhere between $500,000 to $800,000 one-way last week.” Reto Hunziker, group cargo director at charter specialist Chapman Freeborn, confirmed that demand for air capacity from Europe into China has increased, and will remain strong for some time. “We think that this will go on until April, or even until the middle of the year,” Hunziker told JOC.com. “And once China starts working again — factories, infrastructure, etc. — we expect a high demand ex-China into both the European Union and the US.” Ronald Lam, Cathay Pacific group chief customer and commercial officer, said cargo volume in January was down almost 9 percent year over year in what he described as “the most challenging Chinese New Year period we have experienced.” Lam said the carrier saw reasonably solid demand across its network for the first three weeks of January, with China sales recording strong year-over-year year tonnage growth. “By the last week of January, however, overall demand plummeted as manufacturing came to a halt in mainland China during the Chinese New Year holiday,” Lam said in a statement on Cathay Pacific’s January performance. “The delay of the post-Chinese New Year resumption of manufacturing across mainland China has significantly affected both our Hong Kong and mainland China markets.” Freighter capacity holds firm While passenger flight capacity has been cut 40 percent, freighter capacity has not been reduced, and Lam said cargo demand on areas of the network outside China remained buoyant, especially on those trade lanes where significant cuts in passenger capacity have been made. The air cargo industry has yet to put an estimate on how volume will be affected by the virus. In ocean freight, Alphaliner expects global container volume this year to be down almost 1 percent , and China’s first quarter volume to be down 6 million TEU. But the International Air Transport Association (IATA) has warned that airlines will indeed feel an impact this year. “With all the restrictions being put in place, it will certainly be a drag on economic growth. And, for sure, 2020 will be another challenging year for the air cargo business,” warned Alexandre de Juniac, IATA’s director general and CEO, in a statement earlier this month reviewing airlines’ 2019 performance . He added it was too early to predict the long-term effects of measures to combat the coronavirus outbreak. Global air freight demand last year fell 3.3 percent compared with 2018, while capacity grew 2.1 percent, IATA data shows. It was the first year of declining freight volumes since 2012, and the weakest performance since the global financial crisis in 2009 when air freight markets contracted 9.7 percent. Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler .

Air Cargo

Air freight charter rates soaring on coronavirus aid demand

<div class="phx-topic abstract-wrapper">The ocean carrier made the changes ahead of the launch of its partnership with Hapag-Lloyd, referring shippers to the new alliance’s services as an alternative.</div>

The ocean carrier made the changes ahead of the launch of its partnership with Hapag-Lloyd, referring shippers to the new alliance’s services as an alternative.

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<div class="phx-topic">Maersk has removed its standalone express Pacific Northwest service and added a new North Europe service to the Port of Philadelphia. The ocean carrier made the changes ahead of the launch of its Gemini Cooperation partnership with Hapag-Lloyd, referring shippers to the new alliance’s services as an alternative.Maersk told customers this week the TPX service from northern China, South Korea and Japan to the Port of Tacoma will be suspended as of the last January departure from Shanghai. The 3,500-TEU capacity service is being halted as Maersk is “transitioning into the Gemini Cooperation,” the carrier said in an advisory. Rolled out during <a href="https://www.joc.com/maritime-news/container-lines/overbooked-asia-us-trade-gets-three-new-services_20210630.html">the 2021 pandemic container surge</a>, the TPX first called Los Angeles before <a href="https://www.joc.com/article/ocean-carriers-readying-more-capacity-cuts-for-q4-analysts-5203731">it rerouted to the Pacific Northwest in 2022</a>, calling Tacoma’s Husky Terminal along with Alaska’s Dutch Harbor. The TPX suspension leaves Alaska without a direct ocean service to Asia, with Dutch Harbor an important processing center for the state’s fishing industry. Instead, exporters will have to use a US-flag service to Seattle for transshipment to Asia. “We will wind down the service in the coming weeks and continue to connect the concerned areas (excluding Alaska) within Gemini,” Maersk said. Gemini, <a href="https://www.joc.com/article/tpm24-hapag-lloyd-ceo-understands-skepticism-over-gemini-reliability-vow-5241120">the alliance struck with Hapag-Lloyd last year</a>, debuts its services in February, promising shippers that a <a href="https://www.joc.com/article/gemini-cooperation-on-cusp-of-launching-bold-experiment-in-service-networks-5927215">“hub-and-spoke” network</a>can hit high schedule reliability. Gemini will offer two Asia services into the Pacific Northwest, calling Tacoma and the Canadian ports of Vancouver and Prince Rupert. Separately, Maersk said it will start offering a new standalone express trans-Atlantic service called TA5 that will call London, Hamburg, Rotterdam, Antwerp and Philadelphia. The standalone service starts with the February departure of the 2,555-TEU Puerto Limon Express. The TA5 will replace a Philadelphia call from Gemini’s TA3 service, which will instead have a US East Coast rotation that includes Norfolk, along with Newark, Baltimore and Canada’s St John. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com ">michael.angell@spglobal.com</a></div>

Maersk has removed its standalone express Pacific Northwest service and added a new North Europe service to the Port of Philadelphia. The ocean carrier made the changes ahead of the launch of its Gemini Cooperation partnership with Hapag-Lloyd, referring shippers to the new alliance’s services as an alternative. Maersk told customers this week the TPX service from northern China, South Korea and Japan to the Port of Tacoma will be suspended as of the last January departure from Shanghai. The 3,500-TEU capacity service is being halted as Maersk is “transitioning into the Gemini Cooperation,” the carrier said in an advisory. Rolled out during the 2021 pandemic container surge , the TPX first called Los Angeles before it rerouted to the Pacific Northwest in 2022 , calling Tacoma’s Husky Terminal along with Alaska’s Dutch Harbor. The TPX suspension leaves Alaska without a direct ocean service to Asia, with Dutch Harbor an important processing center for the state’s fishing industry. Instead, exporters will have to use a US-flag service to Seattle for transshipment to Asia. “We will wind down the service in the coming weeks and continue to connect the concerned areas (excluding Alaska) within Gemini,” Maersk said. Gemini, the alliance struck with Hapag-Lloyd last year , debuts its services in February, promising shippers that a “hub-and-spoke” network can hit high schedule reliability. Gemini will offer two Asia services into the Pacific Northwest, calling Tacoma and the Canadian ports of Vancouver and Prince Rupert. Separately, Maersk said it will start offering a new standalone express trans-Atlantic service called TA5 that will call London, Hamburg, Rotterdam, Antwerp and Philadelphia. The standalone service starts with the February departure of the 2,555-TEU Puerto Limon Express. The TA5 will replace a Philadelphia call from Gemini’s TA3 service, which will instead have a US East Coast rotation that includes Norfolk, along with Newark, Baltimore and Canada’s St John. Contact Michael Angell at michael.angell@spglobal.com

Trans-Atlantic

Trans-Pacific

North American ports

Container lines

Maersk rejigs standalone services ahead of Gemini Cooperation launch

<div class="phx-topic abstract-wrapper">New services entered the trade last year amid elevated rates and high demand, but a seasonal lull is putting pressure on prices with plentiful space now on the lane.</div>

New services entered the trade last year amid elevated rates and high demand, but a seasonal lull is putting pressure on prices with plentiful space now on the lane.

<div class="phx-topic">Spot rates on the East Coast South America-to-US lane are in fast retreat this month after they hit record highs in the 2024 fourth quarter, driven by heavy volumes that drew fresh capacity to the trade.Rates were at $4,300 per FEU as of Jan. 21, according to Platts, a sister company of the Journal of Commerce within S&amp;P Global, having fallen $1,000 since Jan. 1. That comes after prices were at an all-time high of $5,800 per FEU in November.“The demand has dropped a little, so the vessels are not so full anymore and the rates are dropping,” said Marcelo Machado, a freight forwarder at CSS Logistics in Brazil.The demand decline is in line with traditional market patterns, but the spot rate reductions — which have been unusually fast and dramatic — have set the stage for a potential shift in market dynamics. Prior to this month’s bear market, the ECSA-US trade saw a 10.2% increase in capacity from carriers in the fourth quarter, according to data prepared for the Journal of Commerce by UK-based transport consultancy MDS Transmodal. That capacity injection materialized through two new North-South services running in the fourth quarter, a significant jump from the solo service on the trade in the fourth quarter of 2023. Vessel sizes have also increased, with the average ship size on the lane 63% larger last quarter than a year ago, according to MDS data. Despite the recent rate decline, trade on the ECSA-US lane appears strong overall. Brazilian exports to the US hit $40.3 billion in 2024, surpassing the $40 billion mark for the first time, according to the January Brazil-US Trade Monitor, a quarterly publication by AMCHAM Brasil, which is the American Chamber of Commerce for Brazil. US imports from Brazil boasted an 11% year-over-year jump in 2024, according to PIERS, a sister company of the Journal of Commerce within S&amp;P Global. That increase is even more impressive considering a 0.8% decrease in Brazil’s total annual exports last year, per AMCHAM figures.According to Abrão Neto, CEO of AMCHAM Brasil, the US is still Brazil’s main destination for exports, with a record $31.6 billion in industrial goods in 2024. Neto, quoted in the AMCHAM publication, said Brazil-US trade flows are expected to “remain robust in 2025, close to the highest levels in [the] recent historical series.“However, it is crucial to monitor the high international uncertainties,” he said.Contact Laura Robb at <a href="mailto:laura.robb@spglobal.com">laura.robb@spglobal.com</a>. </div>

Spot rates on the East Coast South America-to-US lane are in fast retreat this month after they hit record highs in the 2024 fourth quarter, driven by heavy volumes that drew fresh capacity to the trade. Rates were at $4,300 per FEU as of Jan. 21, according to Platts, a sister company of the Journal of Commerce within S&P Global, having fallen $1,000 since Jan. 1. That comes after prices were at an all-time high of $5,800 per FEU in November. “The demand has dropped a little, so the vessels are not so full anymore and the rates are dropping,” said Marcelo Machado, a freight forwarder at CSS Logistics in Brazil. The demand decline is in line with traditional market patterns, but the spot rate reductions — which have been unusually fast and dramatic — have set the stage for a potential shift in market dynamics. Prior to this month’s bear market, the ECSA-US trade saw a 10.2% increase in capacity from carriers in the fourth quarter, according to data prepared for the Journal of Commerce by UK-based transport consultancy MDS Transmodal. That capacity injection materialized through two new North-South services running in the fourth quarter, a significant jump from the solo service on the trade in the fourth quarter of 2023. Vessel sizes have also increased, with the average ship size on the lane 63% larger last quarter than a year ago, according to MDS data. Despite the recent rate decline, trade on the ECSA-US lane appears strong overall. Brazilian exports to the US hit $40.3 billion in 2024, surpassing the $40 billion mark for the first time, according to the January Brazil-US Trade Monitor, a quarterly publication by AMCHAM Brasil, which is the American Chamber of Commerce for Brazil. US imports from Brazil boasted an 11% year-over-year jump in 2024, according to PIERS, a sister company of the Journal of Commerce within S&P Global. That increase is even more impressive considering a 0.8% decrease in Brazil’s total annual exports last year, per AMCHAM figures. According to Abrão Neto, CEO of AMCHAM Brasil, the US is still Brazil’s main destination for exports, with a record $31.6 billion in industrial goods in 2024. Neto, quoted in the AMCHAM publication, said Brazil-US trade flows are expected to “remain robust in 2025, close to the highest levels in [the] recent historical series. “However, it is crucial to monitor the high international uncertainties,” he said. Contact Laura Robb at laura.robb@spglobal.com .

Maritime

Container Shipping News

Port News

International ports

ECSA-US spot rates weaken rapidly after hitting record high in Q4

<div class="phx-topic abstract-wrapper">Hapag-Lloyd and Maersk will alternatively use feeder connections to relay Indian loads to the US East and West coasts over Gemini hub ports in Asia.</div>

Hapag-Lloyd and Maersk will alternatively use feeder connections to relay Indian loads to the US East and West coasts over Gemini hub ports in Asia.

<div class="phx-topic">Gemini alliance partners Maersk and Hapag-Lloyd have set the stage to serve shippers on the India-US trade, a market that was not part of the contours of the original collaborative agreement specifically tied to direct calls. The carriers will alternatively use feeder connections to relay Indian loads to the US East and West coasts over Gemini hub ports in Asia. Those extended coverage plans, known as of now, include Hapag-Lloyd acquiring slots on an existing Maersk intra-Asia loop and adding another regional string for US transshipment options. The former service, to be marketed by Hapag-Lloyd as the India-Asia Express (IAX), features a rotation of Mundra, Singapore, Qingdao, Tianjin, Xingang and Busan, but the cooperation beginning in mid-February will be restricted to export loading rights out of Mundra. “This service [IAX] will connect to our Gemini shuttle network via our hubs to attractive other locations in North America and Asia,” Hapag-Lloyd said in a customer advisory. “In fact, the cargo bound to North America will connect at Qingdao and Busan.” Similarly, Hapag-Lloyd will open Indian bookings to the US West Coast region via its India-China (CIX) Service, which has thus far concentrated on shipments from Taiwan to West India on the back of more competitive transits. Intra-Asia operators traditionally thrive on the backhaul trade to India. “From late April or early May, the CIX calling Nhava Sheva and Hazira will load for the [North American] West Coast, including Los Angeles, Oakland, Tacoma and Vancouver, via transshipment at Singapore and/or Shanghai,” a liner industry official with knowledge of the matter told the Journal of Commerce. “The Gemini alliance is driving multiple cargo relay opportunities with enhanced schedule reliability.” The current CIX itinerary includes stops at Colombo, Nhava Sheva, Port Klang, Singapore, Kaohsiung, Hong Kong and Shekou, available data shows. Both Hapag-Lloyd and Maersk already have standalone direct West India-US East Coast connections, known as the TPI and MECL services, respectively. The latter has also been upgraded with a new call at Mundra beginning in late February in a schedule reshuffle that Maersk claims will improve transit times for Indian shippers to the East Coast by five days on average. Meanwhile, Maersk has begun accepting <a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.joc.com%2Farticle%2Findian-forwarders-seek-clarity-on-spot-booking-program-for-gemini-europe-sailings-5921452&amp;data=05%7C02%7Ckevin.saville2%40spglobal.com%7C08d105451d324ae394c608dd3acebe55%7C8f3e36ea80394b4081a77dc0599e8645%7C1%7C0%7C638731381809994995%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&amp;sdata=X%2BKut0Ix6ahwu3s4nGLkLUNiI0yZWyFyurPE7%2Ba5Wb4%3D&amp;reserved=0">spot bookings on its portal for Gemini Europe sailings</a>, while Hapag-Lloyd is expected to open its spot window for Indian customers on the network from Jan. 24, local forwarder sources said. Contact Bency Mathew at <a href="mailto:bencyvmathew@gmail.com">bencyvmathew@gmail.com</a>.</div>

Gemini alliance partners Maersk and Hapag-Lloyd have set the stage to serve shippers on the India-US trade, a market that was not part of the contours of the original collaborative agreement specifically tied to direct calls. The carriers will alternatively use feeder connections to relay Indian loads to the US East and West coasts over Gemini hub ports in Asia. Those extended coverage plans, known as of now, include Hapag-Lloyd acquiring slots on an existing Maersk intra-Asia loop and adding another regional string for US transshipment options. The former service, to be marketed by Hapag-Lloyd as the India-Asia Express (IAX), features a rotation of Mundra, Singapore, Qingdao, Tianjin, Xingang and Busan, but the cooperation beginning in mid-February will be restricted to export loading rights out of Mundra. “This service [IAX] will connect to our Gemini shuttle network via our hubs to attractive other locations in North America and Asia,” Hapag-Lloyd said in a customer advisory. “In fact, the cargo bound to North America will connect at Qingdao and Busan.” Similarly, Hapag-Lloyd will open Indian bookings to the US West Coast region via its India-China (CIX) Service, which has thus far concentrated on shipments from Taiwan to West India on the back of more competitive transits. Intra-Asia operators traditionally thrive on the backhaul trade to India. “From late April or early May, the CIX calling Nhava Sheva and Hazira will load for the [North American] West Coast, including Los Angeles, Oakland, Tacoma and Vancouver, via transshipment at Singapore and/or Shanghai,” a liner industry official with knowledge of the matter told the Journal of Commerce. “The Gemini alliance is driving multiple cargo relay opportunities with enhanced schedule reliability.” The current CIX itinerary includes stops at Colombo, Nhava Sheva, Port Klang, Singapore, Kaohsiung, Hong Kong and Shekou, available data shows. Both Hapag-Lloyd and Maersk already have standalone direct West India-US East Coast connections, known as the TPI and MECL services, respectively. The latter has also been upgraded with a new call at Mundra beginning in late February in a schedule reshuffle that Maersk claims will improve transit times for Indian shippers to the East Coast by five days on average. Meanwhile, Maersk has begun accepting spot bookings on its portal for Gemini Europe sailings , while Hapag-Lloyd is expected to open its spot window for Indian customers on the network from Jan. 24, local forwarder sources said. Contact Bency Mathew at bencyvmathew@gmail.com .

Transshipment networks to give Gemini-linked boost to India-US trade

<div class="phx-topic abstract-wrapper">By promising 90%-plus schedule reliability using a hub-and-spoke model, the Maersk/Hapag-Lloyd alliance is tacking sharply away from the industry pack in attempting to solve the problem of unreliable schedules that continues to plague the industry well after the end of COVID-19.</div>

By promising 90%-plus schedule reliability using a hub-and-spoke model, the Maersk/Hapag-Lloyd alliance is tacking sharply away from the industry pack in attempting to solve the problem of unreliable schedules that continues to plague the industry well after the end of COVID-19.

<div class="phx-topic">With the Gemini Cooperation set to officially launch on Feb. 1, repositioning of ships is under way, thus kicking off one of the boldest and riskiest gambits the container shipping industry has seen in a long time. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5927220_0.1.jpg"></img></div>By promising 90%-plus schedule reliability using a hub-and-spoke network, the Maersk/Hapag-Lloyd alliance is tacking sharply away from the industry pack in attempting to solve the problem of unreliable schedules that continues to plague the industry well after the end of COVID-19. The questions hovering over that strategy and its chances of success fall into two main categories. The first is whether the concept can deliver operationally; in other words, when fully implemented by mid-year, will it achieve the promised 90%-plus schedule reliability? Remember this comes at a time when the industry average was 55% as of November, with Maersk and Hapag-Lloyd themselves not much different, according to data from Sea-Intelligence Maritime Analysis. The second, assuming it succeeds operationally, is whether it will find a market large enough to keep its ships filled without having to chase market share in a potentially weak 2025 market, and possibly even extract a premium at some point if the reliability is so consistent it can influence inventory decisions. Operationally, a key factor in favor of the concept is the two carriers’ ability to rely on each other to be committed to schedule integrity. That not being the case in their previous alliances was a contributing factor in both those partnerships breaking up. The mutual commitment appears to be real. Maersk has a long history of prioritizing schedule integrity, a principle espoused by its patriarch Maersk McKinny Moller, known to employees as Mr. Moller. “Historically going back to Mr. Moller and his father, Maersk wanted to be known for reliability,” said a former Maersk executive. “[As in] ‘I know it’s time for dinner because the Maersk ship always passes by at dinner time.’” Furthermore, the success of the Maersk integrator strategy, where it aspires to manage customers’ end-to-end supply chains, rests on a foundation of schedule integrity, a reputation it needs to reclaim. “Maersk appears to be trying to restore its focus back to the core shipping business,” said a second former Maersk executive. For Hapag-Lloyd, a self-described “pure play” container line, becoming the “undisputed number one” carrier for quality is core to its Strategy 2030. Achieving that can’t not include schedule reliability. <h3>Managing internal and external factors </h3>Whether Gemini achieves its reliability goals is both within and outside its control. Within its control are owned or controlled hub ports such as Port Tanjung Pelepas in Malaysia, in which APM Terminals has a 30% stake. Confidence in PTP to fluidly manage handoffs between feeders and mainliners stems from its strict policy of limiting volumes on its terminal to levels it knows it can handle, a longstanding policy that avoided congestion that affected other Asian transshipment ports last year and during the pandemic. External factors are more challenging. Congestion has been growing at key ports in China, by far the largest container shipping market, with one reason being it has largely stopped building port capacity ahead of demand as it did for many years, Asia veterans tell the Journal of Commerce. Now demand is catching up to capacity, a long-term problem not just for Gemini. Shanghai and Ningbo had the most congestion globally as of Jan. 12, according to Linerlytica. “Who would have thought that Shanghai and Ningbo would become the most congested ports in terms of capacity waiting to berth?” the company said <a href="https://www.linkedin.com/posts/linerlytica_linerlytica-shanghai-ningbo-activity-7285229457953435649-uosj?utm_source=share&amp;utm_medium=member_desktop">in a LinkedIn post</a>.Whether a large enough market awaits an east-west network with high schedule reliability, and whether customers will be willing to pay a premium, are big unanswered questions. Conceptually, if shippers come to trust Gemini’s reliability, they could reduce inventory and be willing to share the value created with the carriers by paying a premium. “For a supply chain to take out meaningful inventory costs, the reliability of the ocean leg has to be over 95% reliable,” the first former Maersk executive said. “Below 95%, the retailers will not trust the supply chain enough to take inventory cost out.” But even if that is achieved, the issue of bifurcated supply chains arises. A reason for the 2015 suspension of Daily Maersk, an earlier attempt at schedule reliability at scale, was customers not being able to divide their supply chains between high-reliability and low-reliability services, and thus being unwilling to pay a premium. Given that Gemini is a smaller alliance — only 60% of the size of the Ocean Alliance, according to Alphaliner — and shippers will typically not give all their cargo to a single carrier, the same issue will arise at least for a certain segment of beneficial cargo owners (BCOs). Given that the other alliances and a standalone Mediterranean Shipping Co. are sticking to traditional port-to-port services more familiar to shippers but prone to cascading delays, Gemini is on its own in trying to solve schedule reliability. As one current Maersk executive put it: “Instead of asking ‘what happens if we fail,’ competitors should rather be asking, ‘what if we succeed?’” Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>.</div>

With the Gemini Cooperation set to officially launch on Feb. 1, repositioning of ships is under way, thus kicking off one of the boldest and riskiest gambits the container shipping industry has seen in a long time. By promising 90%-plus schedule reliability using a hub-and-spoke network, the Maersk/Hapag-Lloyd alliance is tacking sharply away from the industry pack in attempting to solve the problem of unreliable schedules that continues to plague the industry well after the end of COVID-19. The questions hovering over that strategy and its chances of success fall into two main categories. The first is whether the concept can deliver operationally; in other words, when fully implemented by mid-year, will it achieve the promised 90%-plus schedule reliability? Remember this comes at a time when the industry average was 55% as of November, with Maersk and Hapag-Lloyd themselves not much different, according to data from Sea-Intelligence Maritime Analysis. The second, assuming it succeeds operationally, is whether it will find a market large enough to keep its ships filled without having to chase market share in a potentially weak 2025 market, and possibly even extract a premium at some point if the reliability is so consistent it can influence inventory decisions. Operationally, a key factor in favor of the concept is the two carriers’ ability to rely on each other to be committed to schedule integrity. That not being the case in their previous alliances was a contributing factor in both those partnerships breaking up. The mutual commitment appears to be real. Maersk has a long history of prioritizing schedule integrity, a principle espoused by its patriarch Maersk McKinny Moller, known to employees as Mr. Moller. “Historically going back to Mr. Moller and his father, Maersk wanted to be known for reliability,” said a former Maersk executive. “[As in] ‘I know it’s time for dinner because the Maersk ship always passes by at dinner time.’” Furthermore, the success of the Maersk integrator strategy, where it aspires to manage customers’ end-to-end supply chains, rests on a foundation of schedule integrity, a reputation it needs to reclaim. “Maersk appears to be trying to restore its focus back to the core shipping business,” said a second former Maersk executive. For Hapag-Lloyd, a self-described “pure play” container line, becoming the “undisputed number one” carrier for quality is core to its Strategy 2030. Achieving that can’t not include schedule reliability. Managing internal and external factors Whether Gemini achieves its reliability goals is both within and outside its control. Within its control are owned or controlled hub ports such as Port Tanjung Pelepas in Malaysia, in which APM Terminals has a 30% stake. Confidence in PTP to fluidly manage handoffs between feeders and mainliners stems from its strict policy of limiting volumes on its terminal to levels it knows it can handle, a longstanding policy that avoided congestion that affected other Asian transshipment ports last year and during the pandemic. External factors are more challenging. Congestion has been growing at key ports in China, by far the largest container shipping market, with one reason being it has largely stopped building port capacity ahead of demand as it did for many years, Asia veterans tell the Journal of Commerce. Now demand is catching up to capacity, a long-term problem not just for Gemini. Shanghai and Ningbo had the most congestion globally as of Jan. 12, according to Linerlytica. “Who would have thought that Shanghai and Ningbo would become the most congested ports in terms of capacity waiting to berth?” the company said in a LinkedIn post . Whether a large enough market awaits an east-west network with high schedule reliability, and whether customers will be willing to pay a premium, are big unanswered questions. Conceptually, if shippers come to trust Gemini’s reliability, they could reduce inventory and be willing to share the value created with the carriers by paying a premium. “For a supply chain to take out meaningful inventory costs, the reliability of the ocean leg has to be over 95% reliable,” the first former Maersk executive said. “Below 95%, the retailers will not trust the supply chain enough to take inventory cost out.” But even if that is achieved, the issue of bifurcated supply chains arises. A reason for the 2015 suspension of Daily Maersk, an earlier attempt at schedule reliability at scale, was customers not being able to divide their supply chains between high-reliability and low-reliability services, and thus being unwilling to pay a premium. Given that Gemini is a smaller alliance — only 60% of the size of the Ocean Alliance, according to Alphaliner — and shippers will typically not give all their cargo to a single carrier, the same issue will arise at least for a certain segment of beneficial cargo owners (BCOs). Given that the other alliances and a standalone Mediterranean Shipping Co. are sticking to traditional port-to-port services more familiar to shippers but prone to cascading delays, Gemini is on its own in trying to solve schedule reliability. As one current Maersk executive put it: “Instead of asking ‘what happens if we fail,’ competitors should rather be asking, ‘what if we succeed?’” Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

Gemini Cooperation on cusp of launching bold experiment in service networks

<div class="phx-topic abstract-wrapper">Increased demand and diminishing new capacity will lead to an inflection point for logistics rents in a stronger second half of 2025, executives at the real estate developer say.</div>

Increased demand and diminishing new capacity will lead to an inflection point for logistics rents in a stronger second half of 2025, executives at the real estate developer say.

<div class="phx-topic">An increase in rents for industrial distribution space in the US is coming, even if it’s not just around the corner, executives at logistics real estate developer Prologis said Tuesday. A post-election increase in demand for leased space, including third-party logistics sites, has the developer optimistic. “My view is that the market is going to surprise people in the back half of the year,” Prologis CEO Hamid Moghadam told analysts during a fourth-quarter earnings call. “I’ve been wrong before but that’s my view,” he added, noting that others are “a bit more conservative.” Moghadam’s confidence is based on Prologis’ performance in the last quarter, when it leased 60 million square feet of space, a quarterly record for the developer. “We believe market vacancy is topping out and rents will inflect later this year,” CFO Timothy Arndt said during the call. “Leasing in our portfolio accelerated following the US election, and the pipeline has started the year at healthy levels.” Industrial rents on average declined 2% in the fourth quarter from the prior quarter, Christopher Caton, the company’s managing director of global strategy and analytics, said. “Most markets are stable, but we expect modest further decline from here in a handful of soft markets,” he said. Industrial space <a href="https://www.joc.com/article/us-warehouse-vacancies-expected-to-fall-from-2024-peak-5912895">wasn’t difficult for shippers to find in 2024</a> after destocking led to a rebalancing of inventories and the construction boom that started during the COVID-19 pandemic opened more available logistics facilities, flipping a tight market. Prologis’ average occupancy rate was 95.8% for the 2024 fourth quarter and 96.3% for the full year. The occupancy rate is expected to be about 96% at the end of 2025. Prologis is the first of the major industrial real estate developers to release its fourth-quarter results and views on the market. Jones Lang LaSalle and CBRE Group will release fourth-quarter earnings reports in February. Arndt said conditions appear set for a recovery in net absorption of logistics space, fueled by increased need for inventory. That will lead to “a bottoming of global rents” at some point in 2025. From that point later this year, he believes rents will turn upward. Existing customers “are looking to grow,” Caton said. They’re also looking to renew their leases, which means they’re searching for space in Prologis’ existing portfolio, he said. <h3>Bump in confidence </h3>Demand boomed after the Nov. 5 US election, as customers that had delayed decisions about new development came off the fence, said Prologis President Daniel Letter. “We’ve had really 10 weeks of very solid decision-making unlocking previously stalled deals,” he said. Prologis is starting the year with $5 billion and 30 million square feet in projects under development, said Letter, noting “resilient” demand among e-commerce, general goods, electronics and food and beverage customers as well as logistics providers. “3PLs [third-party logistics providers] last quarter broke the record they had in the third quarter of 25 million square feet leased, so 3PLs in the back half [of 2024] leased 50 million square feet,” Letter said. Leasing demand is up 17% year over year to date in January. “Logistics is still a very attractive investable category for investors out there,” Letter said. “We feel strongly that we’ll see a pretty strong year on the transaction market.” In addition to industrial distribution space, Prologis sees strong demand for data centers and energy-related facilities. A former logistics center in Elk Grove, Illinois, was converted into a data center and sold during the fourth quarter. As artificial intelligence fuels demand for data centers, the capital those centers generate can be used to expand Prologis’ core logistics business, Moghadam said. Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com</a>.</div>

An increase in rents for industrial distribution space in the US is coming, even if it’s not just around the corner, executives at logistics real estate developer Prologis said Tuesday. A post-election increase in demand for leased space, including third-party logistics sites, has the developer optimistic. “My view is that the market is going to surprise people in the back half of the year,” Prologis CEO Hamid Moghadam told analysts during a fourth-quarter earnings call. “I’ve been wrong before but that’s my view,” he added, noting that others are “a bit more conservative.” Moghadam’s confidence is based on Prologis’ performance in the last quarter, when it leased 60 million square feet of space, a quarterly record for the developer. “We believe market vacancy is topping out and rents will inflect later this year,” CFO Timothy Arndt said during the call. “Leasing in our portfolio accelerated following the US election, and the pipeline has started the year at healthy levels.” Industrial rents on average declined 2% in the fourth quarter from the prior quarter, Christopher Caton, the company’s managing director of global strategy and analytics, said. “Most markets are stable, but we expect modest further decline from here in a handful of soft markets,” he said. Industrial space wasn’t difficult for shippers to find in 2024 after destocking led to a rebalancing of inventories and the construction boom that started during the COVID-19 pandemic opened more available logistics facilities, flipping a tight market. Prologis’ average occupancy rate was 95.8% for the 2024 fourth quarter and 96.3% for the full year. The occupancy rate is expected to be about 96% at the end of 2025. Prologis is the first of the major industrial real estate developers to release its fourth-quarter results and views on the market. Jones Lang LaSalle and CBRE Group will release fourth-quarter earnings reports in February. Arndt said conditions appear set for a recovery in net absorption of logistics space, fueled by increased need for inventory. That will lead to “a bottoming of global rents” at some point in 2025. From that point later this year, he believes rents will turn upward. Existing customers “are looking to grow,” Caton said. They’re also looking to renew their leases, which means they’re searching for space in Prologis’ existing portfolio, he said. Bump in confidence Demand boomed after the Nov. 5 US election, as customers that had delayed decisions about new development came off the fence, said Prologis President Daniel Letter. “We’ve had really 10 weeks of very solid decision-making unlocking previously stalled deals,” he said. Prologis is starting the year with $5 billion and 30 million square feet in projects under development, said Letter, noting “resilient” demand among e-commerce, general goods, electronics and food and beverage customers as well as logistics providers. “3PLs [third-party logistics providers] last quarter broke the record they had in the third quarter of 25 million square feet leased, so 3PLs in the back half [of 2024] leased 50 million square feet,” Letter said. Leasing demand is up 17% year over year to date in January. “Logistics is still a very attractive investable category for investors out there,” Letter said. “We feel strongly that we’ll see a pretty strong year on the transaction market.” In addition to industrial distribution space, Prologis sees strong demand for data centers and energy-related facilities. A former logistics center in Elk Grove, Illinois, was converted into a data center and sold during the fourth quarter. As artificial intelligence fuels demand for data centers, the capital those centers generate can be used to expand Prologis’ core logistics business, Moghadam said. Contact William B. Cassidy at bill.cassidy@spglobal.com .

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Prologis sees post-election rush for logistics real estate in US

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The world of LTL is slow to embrace change. Business anachronisms permeate current supply chain processes. These vestiges of the way things used to work define the LTL freight transportation procurement process of many modern shippers.David Knuth, logistics specialist at IEWC, a global supplier of cable and wire based in Wisconsin, is happy to have modernized the RFP process, automating the entire LTL bidding procedure with Bid$ense, SMC³’s automated truckload and LTL freight transportation sourcing solution. But when prompted, he can still recall what once was.In his previous job, a large part of his duties were consumed by creating an intermodal bid package for carriers. In a spreadsheet, Knuth detailed the company’s volumes lane by lane, taking care to delete any errant keystrokes or misleading data. He would then email out the information to each carrier, taking time to respond to detailed technical questions about the spreadsheet data. Finally, he had to compile all the results, create an algorithm that would compare the carriers on each lane, and award the business.“It was a huge undertaking. It took about four months to do,” Knuth said of the old process. “It was almost a full-time job for that part of the year, every year.”In his new job at IEWC, he sat down with Bid$ense on day one and was amazed at the capabilities. Knuth had never before used a bid tool. SMC³’s latest versions of Bid$ense automate the process even further, taking truckload and LTL RFPs entirely online. The tool draws on RFP best-practices protocols to streamline the bidding communication process, enabling bidding carriers to respond accurately and promptly to shipper requests. The solution also does all the distribution work automatically, electronically submitting shipper bid data to carriers based on their actual service capabilities and performance records. Carriers are alerted with timely prompts for RFP deliverables, so shippers aren’t waiting by the phone for responses.Another benefit of automating the process is the data-cleansing assistance. When Knuth sent spreadsheets to carriers, data errors might cloud the bidding process; he might have to resend data or simply accept a price that did not truly reflect the costs of doing business. Data cleansing is incredibly beneficial, he said.The spreadsheet technique also made bidding analysis an onerous task. Since Bid$ense automates and streamlines the entire RFP process, intensive examination is now simple. SMC³ knows that each bid has more than one best outcome. With uniform responses from each carrier, shippers can quickly rank results and create an unlimited quantity of what-if scenarios to make the optimal procurement decision.Jesse Burnett of Central Garden &amp; Pet experiences many of the same benefits. Founded in 1980, Central Garden &amp; Pet has spent the last three decades growing from a small garden supply company to a provider of a range of products from dog chews and bird seed to soil supplements and natural insecticides. For much of its life, the company shipped these disparate goods via LTL and truckload carriers to retailers throughout the country, relying on each business unit to negotiate directly with their freight transportation providers. This arrangement worked fairly well for a small company, but as Central Garden &amp; Pet expanded, leadership decided to consolidate decision making.Burnett helped centralize the transportation decision making in 2015 with SMC³’s Bid$ense. Before Bid$ense, every business unit operated independently as far as negotiating with carriers.“There were a lot of different things just floating around,” he said. “We didn’t have master agreements in place; no national pricing at all. The pricing from carriers was just all over the place, depending on where you were.”The transformations he saw with Bid$ense were immediate. Burnett has been using the tool about every other year since its implementation at the company. Central Garden and Pet’s $19.6 million 2019 LTL bid saved the company just more than 9 percent when compared to its historical average. For Burnett, though, bid automation extends far beyond savings.“We knew that we weren’t getting the best pricing offer from our carriers just because nothing was centralized,” he continued. “We knew that if we combined everything from all these business units and paired it with one corporate offering, then it would drive some cost benefit with it.”When the company initially decided to centralize bid procurement, executives researched a number of different methodologies and technologies. In the end, though, Burnett found that Bid$ense was both widespread and well known, and that his carrier partners already knew how to use the application. Burnett also highlighted the data-cleansing process as a major benefit, saying the rigorous process ensures that carriers always return the best price.“It definitely has helped drive savings,” he said. “Any time you go out there and you drive that competitiveness with the carriers and they know they’re in a bid environment, it seems to sharpen their pencils.”Transportation procurement is an integral part of the modern supply chain. With Bid$ense, shippers can develop a strategic implementation plan that saves them time and money, but also helps them create strong relationships with their carrier partners. These carriers appreciate the solution’s data-cleansing process; when carriers receive a complete shipment history and future volume forecast, they don’t have to guess on pricing. Carriers that receive more data from shippers get a complete picture of that shipper’s freight, allowing them to accurately plan instead of simply preparing for the worst-case scenario. Clean data presented through an automated system can lead to both bigger shipment savings and a lasting partnership between carrier and customer.Whether customers are looking to streamline over-the-road transportation bidding by automating the RFP process or create an entirely new, centralized sourcing process, Bid$ense has the analytical horsepower to get the job done.SMC³ 2020 Customer Case Study

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Shippers save money, time with automated transportation bidding tools

If there’s one immutable truth in the world of logistics, it’s this: LTL is an inherently complex form of transportation. Tariffs, rates, DIM weights, transit times — it’s enough to confuse even seasoned logistics professionals. The solution to this knowledge gap has historically been on-the-job training or university supply chain education, but for a variety of reasons there is now a pressing need for third-party, remote LTL training that prepares logistics workers for transportation success. Global Scope Can Overlook Local Intricacies In the past, professionals looking to move into a supply chain career learned about the basics of supply chain from universities. However, many of these college supply chain programs are now global in scope, focusing on worldwide supply chain management instead of the intricacies of specialized domestic transportation. And even these programs, which used to be widespread, are becoming less common. LTL is not an industry of broad-brush strokes; supply chain professionals really need a pointillistic understanding of the logistics of LTL in order to excel in the industry. Accelerating Need for Dedicated LTL Education This lack of specified training put the onus on employers to prepare new hires with the LTL knowledge needed to do their jobs. Dedicated LTL study is a necessity, not a luxury. At the same time, changes in LTL and the broader supply chain world are accelerating. The reliance on e-commerce has ballooned since the start of the pandemic, and last-mile LTL shipments and related e-commerce strains on the supply chain won’t diminish once social distancing abates. That genie isn’t going back into the bottle. So supply chain employers need logistics workers that are fully versed in all aspects of the industry, ready to solve unique shipping and delivery problems based on their extensive supply chain knowledge But why care about LTL? It’s been reported that some shippers in today’s world are no longer concerned with what mode is used to ship their goods. A Multimodal Approach Ensures On-Time Delivery This mode agnosticism means supply chain stakeholders have to be well versed in all modes of transportation. As unforeseen weather events and other disruptions, such as protests, become more common, savvy logistics employees will need to be armed with familiarity of all modes, not just the most popular, to ensure that freight is delivered on time, without damage, and in the most financially expedient way possible. Offerings like SMC³’s LTL online education courses cover a wide range of topics from LTL basics and operations to more advanced concepts like pricing analytics and transportation law. The company also has plans to continually refresh content, adding new expert presenters and taking the feedback of students to make the courses even better as time goes on. Learn more about&nbsp;<a href="https://logisticstrainingcenter.com/smc3-courses/" rel="noreferrer" class="joc_admin__link">SMC³’s LTL Online Education program</a>&nbsp;and view the 2021 hybrid schedule, featuring live industry experts,&nbsp;<a href="https://www.smc3.com/onlinelearning2021/" rel="noreferrer" class="joc_admin__link">here.</a>

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