Maersk Line is putting all of its north-south ocean services in the Western Hemisphere into what it calls a smaller, nimbler organization that can better adapt to the needs of the small shippers that make up most of the market in the intra-regional trades between North and South America, and Central America and the Caribbean.
Maersk Line has traditionally served both large and small customers on a common platform, whether they are large U.S. retail importers or small Central American apparel exporters. But this model is not well suited for the north-south trades with Latin America, Maersk believes. “When you are coming from Maersk Line, which is geared toward a very diverse client base, it’s hard to have the Maersk Line brand solely focus on a smaller customer segment,” said Craig Mygatt, CEO of SeaLand, the new container-shipping company that will launch on Jan. 1, 2015.
Mygatt said in an interview with the JOC that half of Maersk’s current customers in Latin America and the Caribbean ship 500 containers or less per year, while the Maersk operating platform is geared toward much larger volumes, “so you really need to gear your operating platform toward smaller customers.”
Bringing Back a Historic Name
Maersk Line decided to revive the SeaLand name for its new affiliate after visiting customers throughout the region to find out what they were looking for from Maersk’s services. “I was taken aback when they didn’t call it Maersk, but still called it SeaLand 15 years after we acquired it in 1999,” Mygatt said. He said the carrier’s customers had a trust in the SeaLand brand, an historic name that goes back to the earliest days of container shipping, and what they called its “can-do” spirit. “That’s the reason we are bringing that name back to life as something we wanted to build around.”
U.S. Containerized Trade With the AmericasFocusing on a Growing Region
Maersk Line is creating the new brand to capture a larger share of what it sees as one of the faster-growing global markets. “The intra-America market is growing faster than mature markets,” Mygatt said. He expects container volumes in the intra-Americas trades to grow by 6-plus percent year-over-year this year, following 4.3 percent growth last year. Maersk Line estimates total intra-Americas trade volume at 3.2 million 40-foot-equivalent units, of which it has a 6 percent share, or just under 200,000 FEUs.
Of the 3.2 million FEU total trade, the trade between North America and Central America accounts for about 1.2 million FEUs; the intra-regional volume among Central America, northern South America and the Caribbean, 1.2 million FEUs; the trade between the west coasts of North and South America, 400,000 FEUs; and the trade between the east coasts of North and South America also 400,000 FEUs.
Catching up with Near-Sourcing
Another reason for the new company is the relocation of production closer to the U.S. market. “Near-sourcing in Mexico and Central America is picking up steam, and we want to be part of that,” Mygatt said. “Maersk is late coming to the near-sourcing trade.”
SeaLand aims to pick up more of the region’s refrigerated trade, too. “On the import side of trade between North America and Central America and the west coast of South America, the reefer trade makes up close to 50 percent of the total trade.” Maersk does not currently have a big part of the reefer trade. “We want to get closer to the big multinationals, such as Dole and United Fruit, that ship in the trade,” he said. The multinational shippers in the region will continue to be served by the existing Maersk Line sales structure, which is moving to the SeaLand network.
Ships and Slot Charters
The new SeaLand will operate as an independent company serving all the trades between North and South America and ports in between. “We will do everything from soup to nuts, handling all the business process and operating our own platforms and reporting in to Copenhagen,” Mygatt said.
SeaLand will serve the trade on the eight ships that Maersk currently operates on 25 different services to all the countries in South and Central America, the U.S., the Caribbean and Canada. It will also buy slots on other regional carriers. It serves the north-south trade with Canada mainly from Montreal for reefer and apparel imports from Central America.
One trade SeaLand cannot serve is the domestic trade between the U.S. and Puerto Rico, which has to be served by Jones Act carriers. SeaLand will be able to transship containers bound to and from Puerto Rico through feeder services at transshipment hubs in the Caribbean and Central America, as Maersk does now.
Mygatt said SeaLand does not plan to deploy any U.S.-built and manned ships on the Jones Act trade with Puerto Rico, because “it seems like it’s very difficult to make money on that trade.”
Horizon Lines, the Jones Act carrier that was created when Maersk sold Sea-Land Services’ domestic U.S. services in 2003, still uses a modified version of the original Sea-Land logo. Maersk is developing a new logo for its intra-Americas services, which may eventually be used on the ships it operates.
Transshipment Links to East-West Trades
SeaLand will serve as a regional feeder line by transshipping containers delivered by both Maersk Line and other carriers at regional transshipment hubs in the Caribbean. It will also connect with other feeder lines that serve regional ports that SeaLand does not plan to serve. It may also buy slots on other regional feeder lines to serve smaller ports.
SeaLand plans to pick up transshipped containers carried by the P3 Network — parent Maersk Line, Mediterranean Shipping Co. and CMA CGM — and other large carrier alliances when the Panama Canal opens its new locks to commercial traffic. “We see the opportunity to offer intra-American services to the big consortiums when the Panama Canal opens, so when the big ships discharge either in Balboa or Colon or Manzanillo, we will transship containers into the East Coast, especially the South Atlantic.”
Mygatt, who most recently ran Maersk’s North American inland operations, expects the Panama Canal will regain a lot of the vessel transits it has lost to the Suez Canal when it opens its new locks and can accommodate large, more fuel-efficient post-Panamax ships with lower slot costs. “Today we see a lot of ships moving through the Suez Canal from Shanghai that might convert back into the East Coast through Panama to Savannah and Charleston.”
Part of a Family
SeaLand will have a structure similar to Maersk’s other regional carriers including the intra-Asia carrier MCC Transport and intra-Europe carrier Seago Line. Safmarine, which A.P. Moller-Maersk acquired in 1999, is Maersk Line’s long-haul affiliate serving the container and breakbulk trades both within Africa and between Africa and other global destinations.
Maersk Line will begin the transition of its intra-Americas business to SeaLand in a phased approach throughout 2014. It will staff the company with a new team of about 250 employees who will begin their new roles by July 1.
The re-creation of SeaLand to handle Maersk Line’s regional Americas trades comes at a time when its parent company, A.P. Moller-Maersk, continues to execute its strategy to focus on five core businesses, but is not necessarily related to it. The strategy focuses on developing container shipping, energy, drilling, terminals, and other businesses, which includes its Damco logistics unit and Maersk Tankers. As part of that strategy, it announced this week it is selling the majority of its stake in Denmark’s largest supermarket chain Dansk Supermarked and 18.72 percent of department store chain F. Salling. It is also selling 15 supertankers.
