Maersk Line is selling its Brazilian flag subsidiary Mercosul Line to
head off possible concerns from competition regulators over its
acquisition of Hamburg Sud.

Brazil’s Administrative Council for Economic Defense will decide
whether or not to approve the deal later this year and Maersk is
selling the Brazilian cabotage carrier because Hamburg Sud has its
own East Coast South America (ECSA) cabotage and feeder subsidiary in
Alianca Navegacao. Had Maersk maintained control of Mercosul Line and
gained Alianca, it would have controlled 80 percent of the ECSA
cabotage and coastal market.

CMA CGM and Mediterranean Shipping Co. are said to desire Brazilian
and ECSA cabotage and coastal services, and Maersk has been holding
talks with both carriers this week in Sao Paulo, according to various
JOC.com sources in Brazil. Those sources said Hapag-Lloyd, which is
very strong in Brazil, as well as NYK Line and Cosco Shipping, have
also shown interest in Mercosul Line.

Whoever wins the bidding would gain four ships with capacities of
2,500 teus and space for 368 plugs for refrigerated containers. Most
importantly, they would gain access to a Brazilian flag, which would
allow them to operate along the Brazilian and Mercosur coastline.

A source who works closely with Maersk Line told JOC.com today that
Maersk aims to sell the subsidiary even before CADE rules.

“Maersk Line understands full well that CADE will ask it to sell off
one of its two local carriers, either Alianca (which operates 11
vessels) or Mercosul Line (which operates three), and as Alianca is
longer established and with a larger market sure it will, of course,
keep Alianca and get rid of Mercosul Line,” said the source. “And
there seems to be no shortage of interested buyers.”

NYK Line previously had a 10 percent stake in Maestra Navegacao, a
cabotage company that started up in 2011, with the rest of the shares
owned by Triunfo Participações e Investimentos, a Sao Paulo-based
infrastructure company that is a very close confidant and partner to
MSC in Brazil. Maestra shut down in 2014 after heavy financial
losses.

NYK Line will merge with fellow Japanese carriers MOL and “K” Line
later this year, and adding a respectable, well-established Brazilian
flag coastal carrier to their network would help the new entity, and
bolster Japanese and Brazilian shippers, especially those trading
between Japan, the jungle port free zone city of Manaus and Santos.

In addition to Alianca and Mercosul Line, the other major player in
the Brazilian coastal trade is the financially struggling Log-In
Logistica, which controls around 23 percent of a market that is
estimated at around 900,000 teus. Mercosul Line controls 24 percent
of the market and Alianca has 55 percent.