The headline trade lanes of the past 25 years have undoubtedly revolved around shipment of goods from Asia to the world’s dominant developed economies — namely those in North America and Europe.
But as growth rates in those trades have gradually eroded, ocean carriers have increasingly shifted their focus to new markets for Asian-made goods.
And that has led them inexorably to the two large continents that reside south of the equator — Africa and South America. Far beyond niche trades, these connections between Asia, Africa and South America have developed into full-fledged major trade lanes on their own. Whereas the Asia/Europe and Asia/North America lanes can be characterized as linking emerging markets-to-developed markets, these new lanes are emerging-to-emerging, promising growth potential far beyond that which exists in the more mature markets.
It’s led executives from the world’s major container lines to carve out their slice of the pie in both trades, and their focus is not really much of a secret anymore. A.P. Moller – Maersk Group Chief Executive Officer Nils Andersen, MOL President Koichi Muto, and COSCO Container Lines Managing Director Sun Jiakang have all said in recent months their companies will focus increasingly on Asian trade with other emerging markets.
ComPair Data provides an insight into the growth of these trades in 2010, but an important caveat must be added here: There is allocated capacity between Asia and South America and Africa that eludes ComPair Data’s database, due to the level of complexity in the structure of Africa and South America trades. Transshipment in and around Africa is plentiful — with capacity from Asia to Africa affected by transshipment hubs in northern Africa, the Mediterranean and Middle East. This means that space that would appear to be dedicated to, say, the Asia/Middle East or Asia/Med lanes is actually used for the Asia/Africa lane. Conversely, some capacity that appears to be dedicated to Asia/Africa is merely being used for transshipment to Europe at Northern Africa transshipment hubs.
To a lesser extent, the same complexity exists on the Asia-to-South America trades, where transshipment in the north of the continent, the Caribbean and Central America cloud the picture.
But the vast majority of capacity offered from Asia to these dynamic regions is accounted for in ComPair Data’s database. This week, we’ll look at the Asia-to-South America trade.
Fast-growing. According to the World Trade Organization, by the end of 2008 total trade between Asia and South America reached $127 billion, some 149 percent growth in four years. Carriers were likely quite keen to capitalize on that growth, but then the global economic crisis kicked in. So the effects of that rapid growth in trade weren’t visible until 2010, when total allocated capacity from Asia to South America — very much the head haul on the trade, like in the Asia/North America trade — grew 73.7 percent, to 32,189 TEUs weekly on Jan. 2, 2011.
ComPair Data’s has a view into the Asia to West Coast South America and Asia to East Coast South America lanes separately, and it’s clear which one is dominant. Of the 32,189 TEUs of weekly allocated capacity on offer in early January, 30,403 TEUs (or 94.5 percent) were devoted to ports on the East Coast of South America. Put another way, as of January, for every TEU of capacity allocated by carriers to the West Coast of South America, they provided 17 to the East Coast. And that ratio has only widened since the start of 2010. Asia/East Coast South America allocated capacity grew 76.1 percent from January 2010 to January 2011, while Asia/West Coast South America allocated capacity grew a notable, but less spectacular 41.4 percent.
In other words, the growth in capacity in the Asia/South America trade is heavily weighted toward the East. That’s perhaps not surprising, given how prominent a role Brazil plays on the continent. Not only is its economy the largest, it also has the longest coastline and a majority of South America’s major container ports. That growth of nearly 74 percent in 12 months tells a story, but not the whole story. For some carriers expanded their allocated capacity — their skin in the game, so to speak — more substantially than others.
Big Players. No line pumped in more space last year than Hamburg Süd, which upped its allocated capacity by 108 percent to 6,461 TEUs weekly by Jan. 2. In doing so the German line, which specializes in trades to and from South America, passed CSAV, which provided the most capacity in January 2010 but dropped to second with 4,694 TEUs of allocated capacity weekly, despite growing its allocated capacity 47.9 percent during 2010. MOL is the third-largest provider with 3,957 TEUs of weekly allocated capacity, an increase of 33.7 percent.
Hamburg Süd controlled 20 percent of the market as of early January, CSAV 14.6 percent and MOL 12.2 percent. For context, the 10th-biggest provider of allocated capacity, Hanjin, had a 4.1 percent share. The top 10 lines from Asia to South America have a 79 percent share of total allocated capacity.
Aside from the fast growth from the top three carriers in the trade, Evergreen also more than doubled its weekly allocated capacity from Asia to South America during 2010 to 2,413 TEUs. CMA CGM increased capacity 34.6 percent to 2,419 TEUs weekly. Those two were nearly neck and neck as the fourth- and fifth-biggest operators at the turn of the year.
What’s just as interesting is how little direct allocated capacity some of the world’s biggest lines operate in this trade. Maersk and Mediterranean Shipping Co., the two biggest container lines in the world, together accounted for just 1.57 percent of total direct allocated capacity to South America by January, roughly the same as in January 2010. It should be noted that Hamburg Süd and Maersk have a longstanding vessel sharing agreement with their ASAS service. During the peak summer season, the service runs with two loops, with each carrier typically providing one. During the winter schedules the service drops to one direct loop, operated with Hamburg Süd’s large new reefer ships. Maersk also transships some Asia/East Coast South America volumes via its hubs in the Med and North Africa, while on the Asia/West Coast South America lane, Maersk transships in Balboa. But in terms of operated capacity, Maersk hardly has a presence in the trade at present.
Among other top 10 global lines, Hapag-Lloyd operates just 1.2 percent, and China Shipping 2.8 percent, while APL is absent from the trade. COSCO partners with Evergreen on one service between Asia and the East Coast of South America (the 10-ship ESA loop), providing four 3,500 vessels.
No Ordinary Partnerships. An overarching characteristic of the Asia/South America trade is the absence of any services provided by the major east/west alliances. ComPair Data lists not one service from the established global alliances — Grand, New World and CKYH — between Asia and South America.
Instead, there exists a mishmash of newly forged partnerships, such as a service run jointly by Evergreen and COSCO that capitalizes on better relations of late between Beijing and Taipei. Hanjin partners with China Shipping, CMA CGM and Hyundai on one service (the ALW between Asia and the West Coast of South America); and with Wan Hai, Zim, CCNI and Hapag-Lloyd on another (the ALX between Asia and the East Coast of South America via South Africa). Japanese lines “K” Line, of the CKYH, and MOL, of the New World, partner on a trio of services, while NYK, of the Grand Alliance, joins on another service. And that’s just a sampling.
In fact, you could say the most established partnership on the Asia/South America lane is that between CMA CGM and China Shipping, which has historically cooperated on the larger lanes, including the transpacific to North America. There is also a tangle of partnerships between the dominant European lines — including Hamburg Süd, MSC, Maersk and Hapag-Lloyd — and South American stalwart lines CSAV and CCNI, both based out of Chile.
2010 Trend. Hamburg Süd, the top carrier in the trade as of the end of 2010, grew capacity in a consistent fashion throughout last year. It retrenched capacity only twice (by nearly 24 percent from January to February, then again by about 12 percent from June to July). But that second retrenchment was followed by a corrective 35 percent increase by the beginning of August. And from July to January, Hamburg Süd increased its capacity by 105 percent.
CSAV took a different tack. In the first half, the Chilean line grew its allocated capacity one month, then tapered off the next. Then, from June to July, while Hamburg Süd was deleting capacity, CSAV raised its allocated capacity by nearly 25 percent. As Hamburg Süd responded from July to August with its 35 percent increase, CSAV responded back with a nearly 47 percent allocated capacity expansion from August to September. Unlike Hamburg Süd, CSAV dropped allocated capacity by 16.8 percent from early December to early January.
MOL, CMA CGM and Evergreen mostly followed Hamburg Süd’s lead, albeit on a lower scale (those three collectively offered 8,789 TEUs of weekly allocated capacity in early January, compared to 6,461 TEUs by Hamburg Süd alone).
Transshipment Angle About 20 percent of Asian cargo destined for South America is routed through transshipment hubs outside of South America (and thus outside the current scope of ComPair Data. The inverse of this situation, cargo not destined for South America but transshipped in South America, varies greatly depending on the carrier. Some carriers route none of their non-South America-bound cargo through South America. Other carriers clearly do use Cartagena for that purpose, if only on a limited scale.
Another factor to consider on Asia/South America services is the impact of Panama Canal passage. Most carriers will look to optimize their transpacific strings with all slots filled. So if a service is transiting through to the U.S. East Coast the service would have to unload some of its cargo in Panama on the Pacific side, transit and then, if possible, top up the vessel once through the Caribbean side of the canal.
Looking at the transshipment hubs in the region — Panama (both Balboa on the Pacific side and Manzanillo on the Caribbean side) Cartagena, Caucedo, Freeport, and Kingston — most services calling these hubs are connecting to South America as well. So transshipment cargo often is about redistribution to other services with different South America destinations.
Next week, the Asia/Africa trade comes into focus. — Eric Johnson