THREE years ago, Maersk revealed a change of strategy, shifting focus to a pure transport and logistics business and ‘global integrator’ of containerised trade.

Last month, the Copenhagen-based company completed the first voyage of a new combined sea and rail service connecting Asian shippers with ports in Northern Europe via a transcontinental rail journey.

The product, while niche in scale and operation, embodies this new strategy. Maersk links both its landside and ocean expertise providing the sort of supply chain connectivity, control and visibility customers increasingly crave.

The rail and sail offering, or AE19, embarks from hub ports in South Korea and Japan via feeders shipping exports to Vostochniy in Russia’s far east, where they are transferred to rail for a nine-day journey to St Petersburg.

Upon reaching St Petersburg the boxes are then loaded back on to the sea for the final shortsea connection to ports in northern Europe. Maersk’s first AE19 service carried Korean cargo loaded in Busan destined for Gdansk and the Polish market via St Petersburg, which also offers feeder services to other European ports in its vicinity. These include Bremerhaven in Germany or ports in Scandinavia and Baltic countries.

Moving containers by rail for the main bulk of the journey from east to west saves shippers using the traditional all-water route from Asia to Europe up to 20 days, slashing the transit time nearly in half to approximately 18 days, once the shortsea legs are added either side.

In addition to the time saved compared to standard ocean transport, there is also a cost advantage against air freight.

Maersk head of intercontinental rail Kasper Krog told Lloyd’s List that for customers looking for an alternative to conventional Asia-Europe transport methods and one that offers speed to market at a fraction of the cost, the AE19 ticks all the boxes. 

At the very least, he says, it provides Maersk’s customers with a new option. 

“They can choose the non-ocean if that fits or our intercontinental rail solution… they can pick and choose.”

Although the AE19 service is a standalone product, independently, Mr Krog is keen to point out that it is complimentary to Maersk’s ocean product. 

Freight train capacity is restricted to fifty 40 ft containers versus 18,000 teu-plus on the behemoths currently plying the Asia-Europe trade. Indeed, boxes shipped between China and Europe by rail only represent between 4% and 6% of the total ocean market. 

Nevertheless, demand for the rail route is growing, and at a pace. The One Belt, One Road initiative by China has helped accelerate this trend, with significant funding helping to revitalise the Old Silk Road removing many of the former bottlenecks that had long plagued the route.

Mr Krog noted that In 2013, fewer than 100 trains made the journey from east to west each year, whereas today the number is closer to 6,000. And that number is only set to rise.

Mr Krog says that with rail now a viable alternative thanks to an infrastructural overhaul, Maersk has noted a distinct change in customer behaviour. Rail is no longer merely an afterthought when considering supply chain flows in and out of Asia.

“Customers have ocean and air, but they're now using the rail as an integrated path,” he says.

Feeding into the narrative is the sustainability agenda, heralding increasing corporate importance, most notably in retail. With environmentally-conscious consumers surging in number, sustainability is influencing purchasing decisions like never before.

Mr Krog says that sustainability is becoming more of a natural discussion with shippers, who are looking to reduce the carbon footprint of their supply chain.

Fully digitised

The AE19 service is fully digitised, another key component of Maersk’s global strategy, to simplify the booking process. Shippers still to shift to online can still make use of the service. Maersk will however, over time, look to fully digitalise its offering.

Online customers are presented with a “one- stop-shop” from which they can tailor shipments to match supply chain needs, Mr Krog says.
“The customer will not have to go to different departments or sister companies. We have one sales organisation fronting the customer putting the solution together, making it much easier for the customer to connect with us.”

As with other Maersk Rail products, customers can initially choose to book a single container to familiarise themselves with the service. After determining which solution would best suit supply chain needs, customers can then move up to multiple containers or go the whole hog and book a block train, a dedicated train carriage exclusive to the customer. 

One company taking advantage of the block train option is French outdoor and sports equipment retailer Decathlon. In this instance, containers are loaded in China and moved entirely by rail destined for a terminal in northern France, which is only a stone’s throw from a Decathlon distribution centre.

This is the kind of bespoke solution that Maersk wants to replicate with its latest product. 

Tailoring to customer’s specific requirements is what it hopes will help it stand out from a crowded market, one which Maersk finds itself in the somewhat unfamiliar territory of being one of the smaller players.

The total market from China to Europe and the return leg stands at around 500,000 teu. Maersk has a share of less than 5%,  which is formed largely of Damco’s rail products prior to its integration into the wider Maersk group. 

State-controlled operators in China, Russia and Belarus control most of the market alongside the major players such as DB Schenker.

Maersk operates in what Mr Krog describes as “tier two”, which includes smaller independent operators and the rail arms of Maersk’s ocean carrier rivals such as CMA CGM.

Mr Krog says that the so-called tier two market space is where Maersk is targeting to increase its foothold.

“We see a big opportunity for us to grow in the years to come. I think there is also big potential to tap into customers that are not using rail today, where we can help to split their supply chain offering.”

The target set by Maersk for the intercontinental rail route is to increase market share up to double percentage digits, according to Mr Krog.

Differentiator

Offering bespoke products such as the AE19 service will be crucial in elevating Maersk’s inland presence, however, Mr Krog also points to the group’s other big draw, or “differentiator” - having its own brand of containers.

Using Maersk’s ocean containers on the AE19 service allows for a seamless switch between ocean and rail, while in the case of other inland products customers can make use of the group’s empty container depos spanning Europe and China to manage stock flows.

“I think this is our biggest advantage, as we don't have the limited capacity often experienced by other rail operators,” says Mr Krog.

New products will follow the AE19. However, the immediate focus is to grow the customer base of its latest offing off the back of its successful trial run.
Mr Krog says that there is scope to grow to 50,000 lifts annually by 2024 with “massive potential” in both the eastbound and westbound directions.

Retail customers formed a large percentage of those making use of Maersk’s trial AE19 run, which arrived in Gdansk on August 1, with the rest predominantly comprising companies dealing in electronics and automotive parts. Reefer cargoes and other commodities, including iron ore, can also be carried along the route.

For these exporters, Mr Krog says it is all about speed to market. This may be the big draw, but it is the combination of the flexibility granted by auxiliary services, as well as origin and destination feeder connections that will provide control of the end-to-end supply chain that will benefit customers most, he explains.

All of which is the crux of Maersk’s forward global strategy. 

“It’s a different approach, but one we are sure customers will want to buy.”