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Market Analysis
June 2013
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Maersk Line, MSC and CMA CGM now
have such big economies of scale in the
transpacific that they can ride out the current
eastbound freight rate war more comfort-
ably than the rest of the pack, should they
choose to do so.
Recent vessel deployment in the trans-
pacific by Maersk Line, MSC, and CMA
CGM suggests a clear focus on economies
of scale. Instead of trying to be ‘all things
to all people’, their strategy appears more
directed towards only calling at ports where
their ships have a clear competitive advan-
tage.
Gone are the days of trying to appeal to
all customers at all times on a ‘swings and
roundabout’ basis, particularly those want-
ing to reduce the number of service provid-
ers employed, and in has come more careful
transpacific cargo selection.
This has mainly involved the three car-
riers cutting out those West Coast North
America ports where insufficient demand
exists for big ships, or access to big ships
is restricted because of physical limita-
tions. So, it is OK if you want to go directly
to Los Angeles, Long Beach or Oakland,
but not so good if you want to go to
Seattle, Vancouver, Prince Rupert, Portland
or Tacoma. Maersk Line and CMACGM do
have a joint pendulum service from Asia to
Seattle (returning via Vancouver), but with
a limited port-pair range. Up and coming
ports such as Lazaro Cardenas in Mexico
also appear to be in favour.
And, as in the Asia-Europe tradelane, the
three also appear reluctant to share their
economies of scale with anyone else. Slot
charters apart, CMA CGM mainly partners
MSC, and Maersk mainly shares vessels
with MSC and CMA CGM.
The end result is that, compared to a com-
bined market share of just 22% of all effec-
tive eastbound transpacific vessel capacity
deployed in April (i.e. after deduction of
space for wayport cargo etc), the average
size of vessel deployed by the three carri-
ers (8,550 teu) was a massive 32% higher
than the tradelane norm of 6,490 teu. CMA
CGM’s (8,822 teu) was a hefty 36% more,
MSC’s (8,712 teu) was 34% greater and
Maersk Line’s (8,108 teu) was 25% higher
(see chart below).
Ocean carriers’ average transpacific
vessel size in April 13 (teu)
This compares with the three carriers’
33% share of global fleet capacity last year.
As shown in the following chart, their share
of the total vessel transpacific capacity
provided by all carriers was a much higher
36%, but this includes pendulum services
used to carry other traffic, as well as capac-
ity allocated for wayport cargo. The point
demonstrates why this information needs to
be treated with care, some of it being quite
superficial.
Mersk Line, MSC and CMA CGM con-
sequently have tremendous economies of
scale over others, enabling them to ride
out the current eastbound freight rate war
more comfortably. Carried through to a
global level, it probably explains why CMA
CGM and Maersk were amongst the most
profitable of all major ocean carriers at
EBIT level last year (ie prior to payment
of loan interest and tax). MSC’s position is
unknown, being privately owned.
It also explains why carriers, such as
APL and Hanjin, whose transpacific cargo
accounts for a large proportion of their
total liftings (29% and 41% respectively in
1Q13), yet operate vessels well below the
average size, were amongst the poorest.
Seen in reverse, the exercise demonstrates
what these other carriers can yet achieve
with their newbuild orders over 10,000 teu.
In due course, most vessels below 10,000
teu will eventually be cascaded out of the
Asia/Europe route into the transpacific trad-
elane, which will put even more pressure on
the smallest players.
Although Matson and PIL appear par-
ticularly vulnerable in this respect, both
carriers have well established niche markets
to protect themselves – the former between
the US mainland and Guam, and the latter
between Australia and the US. In this sense,
the transpacific leg is probably just marginal
business.
Operating within alliances doesn’t seem
to help yet, as the CKYH’s average vessel
size (5,883 teu) was 9% below the average,
the NWA’s was 2% less at 6,380 teu, and the
Grand Alliance/Zim’s was just 2% more, at
6,609 teu.
n
Top Three
Muscle Out Others