New life for old name
SeaLand will be Maersk’s intra-Americas brand.
Earlier this year, Maersk Line announced it would spin off its intra-Americas service into a new independent unit and operate it under the SeaLand name, reviving a brand of the company founded by container shipping pioneer Malcom McLean.
Maersk acquired the international container business of Sea-Land Service in 1999. (Maersk hasn’t released a new logo for the company, but has been referring to it as SeaLand, without the hyphen in its press releases.)
Craig Mygatt, chief executive officer of SeaLand, said in an interview in March that SeaLand will operate throughout the Americas, from Canada, the United States, and Mexico, Central America and the Caribbean, down into South America, as far south as Chile and Argentina.
SeaLand will offer commercial services to shippers and non-vessel-operating common carriers and a feeder service to Maersk and other liner carriers.
Initially, SeaLand expects to operate 30 ships, with 22 dedicated to feedering cargo from services operating between the Americas and Asia, Europe, and the Middle East, with the remaining eight ships dedicated to direct commercial service between the United States and Central and South America. The company also charters space and swaps container slots with other carriers.
Maersk deploys four ships each in its South Atlantic Express service (with a rotation of Savannah, Norfolk, Wilmington, Santo Tomas, Puerto Cortes, Puerto Moin, Manzanillo, Cartagena, Barranquilla, Santa Marta, Manzanillo, Santo Tomas, Puerto Cortes, and Savannah) and West Coast Central America service (with a rotation of Los Angeles, Ensenada, Lazaro Cardenas, Puerto Quetzal, Acajutla, Balboa, Corinto, Acajutla, Puerto Quetzal, Lazaro Cardenas, and Los Angeles).
The company currently handles about 400,000 TEUs in the region on its commercial services annually and another 250,000 TEUs on feeders.
While most of the feedering it does today is for Maersk, Mygatt said SeaLand plans to seek more of this business from other carriers.
“SeaLand will pursue all of the feeder volumes that we can to get scale into some of these smaller ports. We can work with other carriers and offer a good consistent service for them,” he said.
With numerous services between the Far East, Middle East, and Europe and Latin America trades Maersk is a sizable player in Central and South America. Maersk’s annual report for 2013 stated it has a 16-percent share of the Latin America business and is the second largest carrier in the region.
While the intra-Americas business will be handled by SeaLand, cargo moving between Latin America and other parts of the world, such as Asia and Europe, will continue to move under Maersk bills of lading.
Maersk said SeaLand will have a structure similar to its other regional carriers—MCC Transport, which operates in the intra-Asia trade, and Seago Line, which operates in the intra-Europe trade. The carrier said in its annual report that it has a 6-percent share of the intra-Asia trade and a 12-percent share of the intra-Europe trade.
But in the trade between North America and the Caribbean and Central and South America will face stiff competition from a slew of regional carriers. These include companies such as Crowley, Seaboard Marine, SeaFreight, Tropical, King Ocean in Central America, the Caribbean, and the northern part of South America.
Mygatt said the fact that SeaLand’s back office activities will be handled by Maersk Line out of its global service centers will give it a good cost base and a strong position in Central America, all the way south into Panama and the north coast of South America.
He said the company plans to leverage its relationships with shippers there and also with multinational companies that Maersk serves globally.
Further south, the trade between the United States and countries such as Brazil, Argentina, Uruguay and Chile is dominated by big global liner companies like Hamburg Süd, CSAV, Hapag-Lloyd, and Mediterranean Shipping Co.
Mygatt said today there’s too much capacity in the Brazil and Argentina trade, while there’s more opportunity on South America’s west coast and in Central America.
In 2012, Maersk decided to end its Spondylus loop between South America’s west coast and the U.S. East Coast after a year.
“When you have these smaller ships and go through the Panama Canal, you have to make sure you have your product right,” Mygatt said. “I think we just didn’t have all our ducks in a row.”
David Ross, executive vice president for SeaFreight Agencies, told Cargo Business News’ Port Productivity Conference in February that “we think SeaLand will be a formidable competitor.”
“We assume SeaLand will definitely start with the base cargo of Maersk, which today is given to many of the smaller feeder operators—ourselves and others,” Ross said. “There certainly would be a segment of the connecting carrier business that some of us regional operators do today that will be withdrawn from the market and they will do it themselves. That in itself would allow SeaLand to have a base to start calling a number of ports throughout the region.
“It will be another competitor and, unfortunately, the market typically reacts to more tonnage coming into the trade with rates falling. And lord knows we don't need freight rates falling anymore,” he added.
Mygatt said SeaLand wants to have an organization in place by this July or August and is looking at establishing an office in South Florida, Texas or Panama. SeaLand will have about 240 employees scattered throughout the Americas, including about 50 staff at its headquarters.
The company plans to offer service under a Maersk bill of lading through the end of the year, starting the SeaLand brand on Jan. 1, 2015.
Mygatt said SeaLand will use Maersk Line’s global service centers, but will have “different parameters about how we get information and how quickly we have to respond.” It will also use Maersk services for operational services, such as finance, land-side operations, and human resources.
He said Maersk has found with MCC and Seago that by emphasizing service it has been able to build close connections with customers.
SeaLand, like MCC and Seago, will offer service on many shorter routes, where carriers “need to be quick responding to concerns” of customers, he said.
“You need to be quick with prices. That type of activity works much better with a dedicated company. They’re not looking for answers in 48 hours. That doesn’t work. They’re looking for an immediate response,” Mygatt said. “You have to empower your front line to make decisions. So you need a much different model than how we operate on the East-West trades,” he said.
“You’re out on the water for three or four days in a lot of cases. So you can’t wait, you have to have the immediate answer. You want to have that for the East-West customers, too, but you know the ship is on the water for 14 days, or with Asia-Europe it’s 21 days. So you have more time to work through issues,” he explained.
“Having a trade management team dedicated to a specific area means your knowledge level increases incredibly, and that’s what the customer is looking for,” Mygatt said. “ Not only for sales activity but they’re looking for people to consult with them.”
Drew Evans, executive vice president and chief financial officer of AGL Resources, the parent company of Tropical Shipping which serves 25 ports in the Bahamas and Caribbean, told investment analysts in March that his company views shipping in the region as a “very high touch business” for shippers that are highly dependent on ocean shipping services.
Mygatt said SeaLand sees an opportunity to expand the size of the market it serves, especially in moving refrigerated cargo such as bananas, pineapples, melons, mangos and avocados.
Refrigerated commodities amount to about half the cargo moving out of the west coast of South America and Central America, Mygatt said, and SeaLand believes there’s substantial opportunity to convert cargo moving in breakbulk reefer ships into containers.
He also said there may be opportunity to convince multinational fruit companies, such as Dole, Chiquita or Del Monte, to use containers of liner companies to get product closer to ultimate consumers. Some large supermarkets are in the process of developing relationships with growers and looking at buying fruit in Latin America and arranging transportation of fruit themselves, he said.
In addition, there’s potential for SeaLand to convert shipments moving regionally over-the-road to short-sea shipping. “There’s a lot of over the road between the Central American countries and the U.S. and we’re trying to tap into that,” he said.