Maersk’s African empire

   A.P. Moller – Maersk group’s January Maersk Post newsletter signaled the group would seek to “tip the balance” of its investments in 2011.
   Moving away from developed “old world” economies in Europe and the United States, which have slowed, it said it would focus on newer, emerging ones, notably in Africa and Latin America.
   Group Chief Executive Officer Nils S. Andersen explained in Maersk Post that in areas like Africa and Latin America, the group has more knowledge than most investors coming into those markets. It can get into new projects quicker and in a more qualified way. It is fortunate to have more financial strength than many of its competitors.
   “At the moment the biggest challenge is to quickly identify the right projects in energy, trade or infrastructure and then work hard to get them,” he said.

Anderson

   Andersen pointed out that emerging “new world” economies often have much more interesting growth prospects because of natural resources like oil, and competitive labor markets. Effective infrastructure is the key to unlocking that growth. Projects that facilitate new import and export volumes obviously interest a global logistics operator like A.P. Moller – Maersk.
   Recent tours of Africa and Latin America have convinced Andersen that, while well placed in both areas, the group is positioned particularly well in Africa.
   “We have an organization that understands the markets very well and we have local managers coming up through the ranks who feel committed to our company,” he said.
   Just how well established the group is in African trade can be illustrated through ComPair Data’s database. Combining the marketing activities of Copenhagen-headquartered Maersk Line and its associated African brand Safmarine (run from Antwerp in Belgium), the list of services calling at East, South and West Africa far exceeds any other carrier. In almost all cases Maersk Line and Safmarine separately market space on the same ships but with aligned backroom support.
   With the notable exception of South Africa, which has had reasonably dependable container terminals and infrastructure for more than 30 years, most East and West African countries have suffered from a lack of port investment and reliable direct gearless container shipping services. This has given rise to numerous roll-on/roll-off and multipurpose alternatives and frequent schedule disruptions due to intermittent congestion. It only needed one country’s port to experience problems for a knock-on effect to other countries’ shippers and importers to develop.
   Maersk’s African network reflects this situation. It has direct services from South Africa to North America, North Europe, the Middle East Gulf and Asia. However its West and East African services are built up from a mixture of multiple separate smaller connections into key regional hubs, alongside separate smaller multiple direct services to Asia.
   Maersk is fortunate to have built up sufficient volumes to run these multiple links with ships of a reasonably cost-effective size. It means the quality of its service in one African country to/from other parts of the world can largely be insulated from sudden dire problems in another.
Three hub ports at the extreme western end of the Mediterranean — Malaga and Algeciras in Spain and Tangiers in Morocco — are capable of handling very large containerships of up to 15-meter draft. Maersk uses all three. Maersk’s biggest 15,000-TEU ships exclusively use Malaga for weekly eastbound calls en route between North Europe and South China.
   On their return from South China these ships call at both Tangiers and Algeciras en route to North Europe. The ComPair Data database reveals a surprising number of Maersk mainline loops also call both Algeciras and Tangiers. So do eight of its nine multiple West African end-to-end loops. One small fortnightly service calls only Algeciras. A 10th West African loop calling both Algeciras and Tangier operates southbound only. From West Africa it continues counter-clockwise around Africa to Durban, Dubai and Jeddah, then back though Suez to Algeciras/Tangiers.
   The Algeciras and Tangiers hubs have specialized directional roles. Exports from West Africa are being fed into Algeciras. Imports for West Africa are loaded in Tangiers. This is confirmed by four West African loops that continue northbound beyond Algeciras without calling Tangiers. On returning from North Europe or Portugal, respectively, all four loops call at Tangiers as well as Algeciras southbound.
Added together, the 10 feeders provide 17,000 TEUs of southbound weekly capacity from the Algeciras/Tangiers double-hub into West Africa. The nine end-to-end loops that return there northbound from West Africa aggregate 14,500 TEUs per week. The four loops that continue beyond Algeciras provide 1,800 TEUs of additional weekly “spoke” capacity to/from Portugal’s Atlantic Coast (not all of which will originate or be destined for West Africa), and a further 2,500 TEUs per week in a single North Europe “spoke” providing any inward service calling Algeciras with a useful four-day connection direct to Dunkirk.
The double-hub picture expands to show where West African exports fed into Algeciras and imports picked up in Tangiers will ultimately be going to and coming from. The giant ships of AE7, for instance, arrive in Tangiers non-stop from South China to discharge cargo for West Africa before loading West African cargo in Algeciras for North Europe. It’s an elegant kind of dance, because the West African feeders will have first dropped off their North Europe-bound cargo in Algeciras before crossing to Tangiers for their return West African cargo, which the big ships and others have already left behind for them there.
In the West Mediterranean Maersk uses ships of 9,500 TEUs to feed Tangiers. As its AE6 ships from Southeast Asia and the Red Sea discharge cargo in Gioia Tauro, Barcelona and Valencia, they have the space and time to move West African and Middle East cargo from these locations to Tangiers. They then load in Algeciras and steam pretty smartly for Maersk’s East Mediterranean hub in Port Said and then the mega-regional Southeast Asian hub in Tanjung Pelepas, Malaysia.
   The pattern that emerges is top-transit hub-to-hub connections:
   . The AE9 loop provides Algeciras to Salalah, Columbo, Tanjung Pelepas and North China.
   . AE1 from North Europe delivers into Tangiers, picking up for Jeddah and Dubai en route to Ningbo.
   . MECL2 (from the U.S. East Coast and Houston) links Algeciras to Port Said and Dubai.
   . Also from the U.S. East Coast, Maersk shares a West Mediterranean loop with VSA alliance partner CMA CGM, which calls at Algeciras both inbound and outbound.
   . In the other direction the round-Africa loop comes into Tangiers from Dubai and Jeddah, alongside ME1 from Salalah.
   The Algeciras-Tangiers double-hub has other global connections. Maersk’s Samba service provides a 3,000-TEU one-way weekly outbound spoke from Algeciras to East Coast South America alongside its 4,500-TEU end-to-end “L-Class” reefer loop, which terminates with calls in both Algeciras and Tangiers.
   Finally there is the fascinating case of the 2,900-TEU Andean 1 loop, which sets out from North Europe for Panama and the West Coast of South America, but heads back from Maersk’s Pacific regional mega-hub in Balboa as an inward-only spoke to Algeciras. Service opportunities from West Coast South America inwards to West Africa are clearly a lot better than going the other way.
   In addition to its multiple links from the Algeciras-Tangiers double-hub to West Africa, Maersk also has three separate loops operating directly from West Africa to its regional Southeast Asian mega-hub in Tanjung Pelepas. All three are routed south around South Africa, so there is already potential for a new hub to be located there. If the three West Africa/Far East loops were converted to end-to-end West Africa/South Africa ones, alongside the fourth round-Africa one, they would collectively deliver into this hub 10,877 TEUs of weekly capacity, returning with 8,365 TEUs to West Africa going the other way.
   If the Asia-bound portion from West Africa was then added to Maersk’s existing 4,900-TEU South Africa/Asia capacity, the South African hub would have 13,265 TEUs of weekly capacity already available for its “spoke” to Tanjung Pelepas. Likewise the round-Africa loop provides a one-way, 2,500-TEU spoke from southern Africa to Dubai and Jeddah, alongside another end-to-end 2,230-TEU loop to Salalah and Dubai, returning via Bandar Abbas and Mumbai.
   These volumes would be in addition to Maersk’s roughly half shares of the North Europe/South Africa 4,500-TEU SAECS end-to-end loop and the East Coast North America 2,300-TEU AMEX joint loop with MSC.
   Maersk is also extremely well established in East Africa and the Indian Ocean. Here the multiple loop strategy re-emerges, as well as separate connections to different hubs. Djibouti attracts passing calls from loops like MECL2 en route between Port Said and Dubai, and the Horn of Africa service from Tanjung Pelepas to Dubai and Jeddah. However, Mombasa and Dar es Salaam have one 2,450-TEU dedicated weekly feeder loop connecting into Salalah and Dubai, with a separate 2,200-TEU one to Tanjung Pelepas and Asia.
   Mauritius and Mozambique are well connected to Tanjung Pelepas, and Maersk operates a 1,700-TEU feeder loop down to Mauritius and the Islands from Salalah. However, Maersk’s Safari 1 loop only connects South Africa to Mauritius in an outbound direction en route to Tanjung Pelepas. It thus has 6,630 TEUs of capacity heading northbound to Tanjung Pelepas from Mauritius, compared with 1,700 TEUs heading south.
   From March, Maersk Line will have a series of 38 new ships arriving with shallow draft and high reefer capacity, customized for its key emerging trades. Its intentions are now plain: “Maersk Line aims to enforce its position as undisputed leader in the West African market by further strengthening its network and deploying new vessels,” a Maersk Post headline summarizes. Maersk Line managers talk of a market share range and financial targets that would keep Africa at the very top of Maersk Line’s portfolio.
   Group CEO Andersen’s in-house interview about emerging economies concludes: “We probably have opportunities to work more closely together among the business units. Mostly not in a formal structure, but in an informal way, helping each other to identify business opportunities and in some cases maybe even offering joint solutions to a customer or a government.” – Francis Phillips