Maersk’s firm grip on America Süd

As outlined in previous commentaries, Maersk Line and its Belgian sister line Safmarine together give Denmark’s A.P. Moller – Maersk Group a highly dominant position in worldwide liner trade with Africa (see “Maersk’s African Empire” and “Asia’s emerging-to-emerging growth” ). Using the ComPair Data database the group’s position in Latin America, though not so obviously dominant, can be very similarly examined. Geographically the region stretches from Mexico to the distant southern tips of Chile and Argentina, encompassing central and northern South America as well as much of the Caribbean. On the East Coast of South America, Portuguese-speaking Brazil has become the main engine of trade growth. Mercosul Line. Unlike the situation in Africa, on the East Coast of South America intra-Brazilian (cabotage) coastal trade and feedering is ostensibly restricted to Brazilian-flag owners using Brazil-built and Brazil-crewed ships. Exceptions have been made in the case of A.P. Moller – Maersk and Germany’s Hamburg Süd, which have each acquired Brazilian container subsidiaries — Mercosul Line for Maersk, and Alianca for Hamburg Süd. Maersk provides three 2,500-TEU Maersk-named ships to Mercosul along with a fourth ship provided by a Brazilian firm called Log-In. Their weekly joint service with a 28-day round voyage connects the key up-river Amazonian port of Manaus, along with Pecem, Suape and Salvador in northern Brazil, with the southern ports of Santos, Imbituba and Paranagua. Maersk’s Samba service from North Europe-Algeciras connects with Mercosul in Santos to relay Brazilian boxes to Buenos Aires, Argentina. Hamburg Süd and Maersk work closely in East Coast South America, exchanging slots between Mercosul and Alianca and also operating joint feeders out of Montevideo, Uruguay, to reach more southerly coastal outports in Argentina. One Maersk Montevideo feeder runs up the River Plate each week to two more Argentinian ports, Zarate and Rosario. East Coast-To-Asia Strategy. The two lines have long shared loops in the East Coast South America trade to Asia, now with stops each way in South Africa. They are introducing larger reefer-heavy ships of around 8,000 TEUs, which look very competitive indeed. This trade is interesting because, like Asia to West Africa, there is a choice of two ways to go; direct via the Cape, or with transhipment via a hub port like Tangiers or Algeciras in the Mediterranean. The discretionary routing element Maersk has carefully built into much of its global network puts it in a stronger position to solve imbalanced trade flows than other major carriers like Hamburg Süd who have not yet caught up. Maersk has also carefully nurtured its position in other areas. Suppose, for example, there is far more cargo from Asia moving into East Coast South America than returning the other way, Maersk can part-load its Asia-bound ships for transhipment to the Middle East via South Africa, reloading them in South Africa with African cargo for Asia. Unlike Hamburg Süd, it has two loops connecting South Africa with the Middle East, one very conveniently going only one-way counter-clockwise around Africa. From the Middle East, Maersk’s surplus eastbound boxes from South America would be more than half way back to Asia. Safmarine Europe-Med to East Coast South America. The Safmarine brand only joins Maersk on it’s four loops touching South America from North Europe and the Mediterranean, all four running down to the River Plate area. Two of these are Maersk’s own: the North Europe/Algeciras Samba loop (vessels averaging 3,100 TEUs), and its L-Class loop (4,500 TEUs) running end-to-end out of its West Med double-hub in Algeciras-Tangiers as far as Montevideo. The other two loops are both operated by Mediterranean Shipping Co. Ltd., with Maersk and Safmarine as slot charterers, one with 5,600 TEUs from North Europe and the other a 5,000-TEU loop from the West Mediterranean. U.S. East Coast Connection Missing. Where Maersk appears to be missing a direct connection from East Coast South America is to East Coast North America. However it has an interesting 50-50 vessel sharing loop with CMA CGM called BRAZEX (average 2,800 TEUs) connecting Buenos Aires and Southern Brazil through to Cartagena, Colombia, and Manzanillo, Panama. This loop stops both ways in Trinidad, which is probably not a great deal of help to Maersk for North America, but CMA’s Cagema mainliner has a fairly fast link to Savannah. At a guess, it is easier for Maersk to get boxes back to Asia via somewhere connected to Manzanillo than via Savannah or New York. The only direct connection Maersk has with North America from East Coast South America is a slot charter on a joint Hapag-Lloyd and CSAV Mexico/U.S. Gulf loop of 4,600 TEUs. Panama Mega-regional Twin-hubs. Maersk uses two main hubs on either side of the Panama Canal: Balboa on the Pacific side (10 loops call there), and Manzanillo, Panama, on the other (nine loops). Three Maersk loops call at the major hub of Cartagena near Manzanillo. However in two cases this seems for the benefit of its vessel-sharing partners (Hamburg Süd for an Oceania/U.S. East Coast loop and CMA CGM for BRAZEX). These services make additional calls in either Balboa or Manzanillo for Maersk. The third is a small (1,200-TEU) Manzanillo feeder connecting to three Caribbean ports in Colombia in one direction, and the U.S. Gulf via Central America (and Progreso, Mexico, southbound) in the other. Because the canal intervenes between Balboa and Manzanillo, these two mega-regional hubs are not quite so closely linked as the double West Med hubs of Tangiers and Algeciras. Balboa on the Pacific side connects to a network of Pacific West Coast feeders stretching between Los Angeles in the north and Lirquen in Chile’s south. It also connects directly to Asia and Oceania. Manzanillo covers loops that stay exclusively in the Caribbean or head for the U.S. East Coast, North Europe, Algeciras, and East Coast South America. Ships on three of the five loops passing through the canal call at both Balboa and Manzanillo in at least one direction. Maersk’s biggest loop from Asia and West Coast Mexico (the 7,800-TEU AC2) of necessity terminates in Balboa, being too big to transit the canal, while the recently restructured CRX loop from North Europe (2,600 TEU) now discharges westbound exclusively in East Coast Mexico before returning via Manzanillo. Hub-and-spoke Design Obscures Routing Flexibility. A twin-hub like Balboa-Manzanillo can be viewed as a single entity, but it is notoriously difficult to analyze. Properly balanced, it should obey the law of “what goes in equals what comes out,” and the largest single cargo portion of any through loop should be moving between its two ends. However, if we take the 4,900-TEU, all-water transpacific TP7 loop that calls Balboa both ways as an example, it may look like an Asia/U.S. East Coast loop. But there is no way of knowing if it has 70 percent Asia to West Coast South America and 70 percent West Coast South America to U.S. East Coast in one or both eastbound or westbound directions. Because of the comprehensive nature of Maersk’s hub-and-spoke system, its choice of weightings is highly flexible and opaque. All that can be identified for certain is the capacity each “spoke” or group of spoke services are bringing into and taking out of a hub, but not the breakdown of where between them any cargo is actually coming from and going. Even the 7,800-TEU ships of Maersk’s transpacific AC2 loop have an undisclosed split of cargo arriving Balboa between boxes originating in Asia and those from an intermediate stop in Lazaro Cardenas, Mexico. On leaving Balboa, both AC2 and TP7 loops head back (much more slowly than eastbound) directly for Asia — AC2 for Yokohama, and TP7 for Kaohsiung and southern China. Adding the two together, Maersk’s westbound capacity weekly from Balboa to Asia is 12,700 TEUs. West Coast South America Spoke. On the spoke from Balboa that runs down the West Coast of South America, there is a mixture of dedicated Balboa feeders overlaid by three loops that run through the Panama Canal for onward destinations in Europe and East Coast North America. This resembles Maersk’s strategy in West Africa, where multiple loops from different individual countries all feed independently into Algeciras-Tangiers. However unlike West Africa, Maersk has no additional direct connections from West Coast South America to Asia; everything for Asia is routed via Balboa. In addition to West Coast South America’s role in three important north/south trades (to Asia, to North America and to Europe), it also has superb transshipment connections to the rest of Latin America, and this is reflected in this spoke’s even larger contribution to what goes in and comes out of Balboa-Manzanillo. Three dedicated end-to-end feeder loops together generate nearly 8,000 TEUs per week to/from Balboa. The largest of these employs 4,100-TEU ships that provide intra-West Coast service in addition to feeding Balboa. Reinforcing these three dedicated feeders are the three West Coast loops that run through Panama: the 2,600-TEU ECUBEX loop from Guyaquil, Ecuador, to Balboa which then runs straight to Rotterdam, Bremerhaven and St Petersburg; the new 1,696-TEU Spondylus loop from Peru and Ecuador to Balboa, next calling Miami and New York; and the 2,944-TEU Andean loop linking San Antonio and Callao to both the Balboa and Manzanillo hubs before connecting them to their West Mediterranean counterpart in Algeciras. The Andean then becomes an Algeciras-to-North Europe “spoke” before heading directly back from Rotterdam and Tilbury to call both Manzanillo and Balboa again en route to West Coast South America. In total, Balboa’s six West Coast South America loops generate 15,200 TEUs of spoke capacity each way per week. Between them they cover a full range of nine West Coast ports, with only larger ones being duplicated. Other Spokes. Where all these West Coast slots connect to, or originate from, after or before passing through the Balboa-Manzanillo mega-regional hub is further hidden from view by two more Pacific-based spokes and various so-far-unremarked loops that feed into Manzanillo on the Caribbean side. Maersk has roughly half-shares with Hamburg Süd in a 3,000-TEU U.S. East Coast-to-Oceania loop. It has another 1,700-TEU loop running northwards from Balboa along the full range of ports in Central America and Mexico to Los Angeles. (This calls in Lazaro Cardenas, Mexico, both ways, in addition to the southbound only call of AC2.) Manzanillo, Panama, has a network of feeders that are every bit as comprehensive as Balboa’s. They connect to ports in the U.S. Gulf, Mexico, Central America, Colombia, Venezuela and Amazonia. As previously mentioned, Maersk’s half-share in BRAZEX with CMA CGM connects Manzanillo with Trinidad and the rest of southern Brazil and Argentina. Very roughly these spoke connections amount to 10,500 TEUs per week going in and out of Manzanillo. Hub’s Hidden Reward. A hub-and-spoke system makes it easy to overlook two or more loops running side by side along the same spoke. For instance when the Spondylus loop to the U.S. East Coast from East Coast South America began, it was joining the TP7 loop from Asia and the Oceania loop from Oceania on the Balboa-Manzanillo to U.S. East Coast leg. In total Maersk has 8,100 TEU-per-week capacity available both ways on this spoke. Much of this capacity may indeed be either originating in or destined for East Coast South America, Asia, and Oceania respectively, where the three loops appear to be coming from and returning to. Crucially though, thanks to Maersk’s superb range of transshipment choices at the crossroads of Panama, the same ship slots may be connecting U.S. East Coast to a very different range of ultimate destinations/origins when being loaded/discharged in their opposite directions. — Francis Phillips