Container carriers' battle for Asia-West Africa intensifies

Competition is growing on the trades between Asia and West Africa, where weekly capacity and ships sizes have increased by 40 percent. The big question is how Maersk Line and CMA CGM plan to stay ahead, says SeaIntel.

Togo i Vestafrika.

Competition on the trades between Asia and West Africa is escalating, and weekly capacity and ships sizes have increased by more than 40 percent in just one year, according to a new analysis from SeaIntel.

Maersk Line and CMA CGM are among the leading carriers on the trade, where the two carriers increased their presence significantly last year. But more carriers are headed the same way and the question now is how the two European carriers plan to stay ahead amidst the growing competition.

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"We believe that Maersk Line, CMA CGM, Safmarine and Delmas will attempt to maintain the position of market and cost leader in the Asia-West Africa trade lane, so given the current situation in the market we will most likely see the two carriers introduce level of rationalisation and upgrade of their Asia-West Africa services," says SeaIntel.

If the two carriers decide to reduce the number of services from five today to three instead, while also increasing the average size of ships to 8,000 teu, they might be able to reduce costs, says the analyst agency. Another option could be to add a sixth loop to the network and thus increasing the sales argument to customers.

Several carriers strengthening presence on the trade

Ten operators were present on the trades in January 2014; Maersk Line and subsidiary Safmarine, NileDutch, PIL, CSCL, Hapag-Lloyd, NYK, GSL, CMA CGM and the carrier's subsidiary Delmas. Maersk Line and CMA CGM subsequently performed a significant build-up with a comprehensive collaboration offering five services - a move that altered the market through, for instance, the introduction of bigger ships of up to 5,700 teu, the biggest ships on the trade at that time, according to SeaIntel.

Maersk Line and CMA CGM have for many years been dominant on the trade and, including subsidiaries Safmarine and Delmas, the carriers' market shares in January 2014 stood at 32 percent and 21 percent, respectively, alongside PIL, which also had a market share of 21 percent.

Market shares Asia-West Africa in January 2014

2015-01-26 11_26_28-https___files.ctctcdn.com_6b14cd19101_0ddf5f95-ca9d-4f49-95bc-b1ee1ef93b0b.pdf.png

Source: SeaIntel

Carriers are not the only ones to have changed their approach to these trades. In April last year the world's second largest container carrier, MSC, introduced its own service on the trade, operated by two ships of 8,500 teu today. MOL, Evergreen and Cosco also entered the field.

Safmarine holds key to Maersk Line's Africa-plan

CSCL, NYK and Hapag-Lloyd withdrew from the trade in the same period in order to join forces with some of the other carriers. CSCL is currently cooperating with PIL while Hapag-Lloyd and NYK are collaborating in Gold Star Lines' (GSL) FAX service. Common for all these carriers is the fact that they are increasing the size of their ships. The growing competition is also reflected in the weekly capacity, which - according SeaIntel Consulting - has increased from 33,250 teu to 48,675 teu in just one year, a 46 percent increase, while average size in the period grew 48 percent, from 3,025 teu to 4,475 teu.

The number of operators has grown from ten to 14, and one thing is certain, namely that competition will intensify even further:

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"The increasing competition will likely continue, as the carriers need to find new trades to deploy vessels that have been cascaded from the larger trade lanes, due to the significant number of +10,000 TEU newbuildings that have entered the market in the past three years," says SeaIntel, pointing also to the container carriers' orders for even more ultra-large vessels of up to 20,000, which numerous Asian carriers are expected to order in the coming months.

Attractive trade route

While container carriers are struggling in their attempts at securing increased profits on several trades, there could be a good reason to bet on Asia-West Africa, as the trade stood out as a bright spot in 2014.

"The North-South routes were seen by many as the best bet for carriers as the trade that could deliver the biggest returns. Carriers such as Maersk and Hamburg Süd took up that gamble with orders for big wide-beam ships designed specifically to cater for the anticipated fast-growth regions such as Latin America," said Drewry in a Container Insight analysis before Christmas.

If this plan holds, Maersk Line will soon launch a major offense on the key trades to and from regions such as Latin America and Africa. The carrier has for years been making much higher profits on the so-called North-South trades than on the carrier's biggest business, the East-West trades on Asia-Europe, Asia-US and Europe-US.

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"We're not just going to defend our position on the North-South trades, we're going to expand it," said Maersk Line CEO Søren Skou at A.P. Moeller-Maersk's Capital Markets Day last year, citing the carrier's large organization in Africa and Latin America.

Market shares Asia-West Africa in January 2015

2015-01-26 11_27_07-https___files.ctctcdn.com_6b14cd19101_0ddf5f95-ca9d-4f49-95bc-b1ee1ef93b0b.pdf.png

Source: SeaIntel

Golden North-South routes disappoint big-time in 2014

Maersk Line challenges rivals with North-South growth strategy

SeaIntel: Carriers risk diving rates on Asia-West Africa

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