The playing field is not even when pursuing new route opportunities in north-south trades. The ever-increasing scale of the biggest players simply means that they have more assets to deploy.

Raids on the NOO (non-operating owner) second-hand fleet by Mediterranean Shipping Co. (MSC) and CMA CGM in the 2000- to 8000-TEU ship size category and the consequent squeeze on ships available in the charter market (causing high rates on what is available) mean that attractive propositions in developing trades end up on the back burner for carriers requiring charter tonnage.

This, of course, could change quite rapidly if big ship oversupply results in cascading and the return of smaller tonnage to NOOs. Right now, however, the only option for many carriers is to move ships off a weak trade and redeploy them to a promising one. This is not an easy decision, but waiting for the charter market to change is not a solution as it will change for everybody at the same time.

Meantime, opportunities come and go. Developing trades is a particular challenge as volume growth is volatile, imbalances can be big, and these trades are easier to tip into oversupply if a sizeable capacity injection is made.

US to West and South Africa

An interesting case study of punching power and nimbleness is the recent move by MSC to introduce a new stand-alone service connecting the US with West and South Africa.

With Maersk’s withdrawal from the joint service with MSC connecting the US East Coast and Freeport (and thus the US Gulf) with South Africa, it’s not a surprise that MSC would step up to be the only direct operator in the trade. There may be hiccups at the political level, but trade patterns tend to be more robust than the short-term programs of any government.

MSC — never slow to identify an opportunity — has grabbed Maersk’s withdrawal as a gift, not only to dominate one trade but also take pole position in another by adding West Africa in the rotation in both directions. Thus, MSC ties in critical mass and alleviates any concern about short-term trade flows between the US and South Africa.

Looking at Container Trade Statistics (CTS) volumes by trade sector, it’s actually quite surprising that Maersk and MSC did not prioritize a USEC and US Gulf link with West Africa over the link with South Africa or look earlier at doing both. MSC has recognized that without direct competition, the diversion to serve West Africa in both directions is achievable while still being dominant in both trades.

The CTS stats show that neither trade has experienced gangbuster growth in the last five years, but if you are the only operator with a direct service, you can be reasonably assured of grabbing a high market share and setting the tone for highly contributive rates.

What is clear is that a USEC to South Africa service was on fragile ground even before trade tensions threatened erosion. The addition of West Africa, however, gives the service a hyper boost.

If getting a dominant position in two direct trades on one service was not enough, there is another new layer of opportunity for MSC by adding and connecting regions.

Owned hubs and double-dipping delight

By putting West Africa in the rotation, MSC has added intra-Africa capability. As the ships will be light coming out of South Africa, the strong trade to West Africa is an excellent chance to use dead space and provide another stream of revenue to the service.

The fact that MSC can use hubs in this process that it partially or completely owns — Freeport, San Pedro and Lome — and use accompanying feeder systems to tap multiple local markets means that its widened products and costs are under its control.

Meanwhile, spot rates being offered suggest that MSC is going to have a substantive premium — particularly in the US to South Africa lane in both directions and with West Africa providing so much extra critical mass.

This deployment is not just a case of MSC having more ship muscle to flex than others. It’s also about network planning dexterity and having a portfolio of well-positioned hubs that enable local and connecting cargoes to be maximized without congestion.

It would be foolish to extrapolate the road ahead from one new service, but the fact that MSC brings so many things to bear and can move so quickly implies that others will have to be at the top of their game to compete.