Maersk Takes Part in U.S. Military’s Shipping Business

The Alliance St. Louis, a 656 feet long and 11-deck container ship has shifted from transporting commercial cargo between the U.S. and Asia to carrying of military cargo from the Middle East, Bloomberg reported.

In the aftermath of the pullout operation from Iraq and the one from Afghanistan scheduled for 2014, the Defense Department in shortage of sufficient capacities and in need of prompt and cost effective solution contracted commercial lines for the job; assigning A.P. Moeller-Maersk A/S. (MAERSK) with a considerable portion of the task.

“If the drawdown takes place the way we envision it, there will be some opportunities,” a vice president at Maersk Line Ltd., a U.S. subsidiary of Maersk, Rick Boyle commented on the pullout from Afghanistan.

Only last year, Maersk, owner of the world’s largest shipping line and operator of Alliance St. Louis,  won half the military’s $1.82 billion in contracts allocated for shipping supplies and equipment around the world. Moreover, in the fiscal year closed with Sept. 30, the company increased its order book for six-fold amount, when compared to the previous year, scoring $800 million from the Pentagon.

According to Bloomberg’s calculations this is 2.9 percent of its container shipping business and 1.3 percent of the company’s $60.2 billion revenue from 2011.

Being a part of “ro-ro” fleet, Alliance St. Louis meets perfectly the needs for carrying military vehicles. Since the ship left the Texas port on April 2 from Beaumont, it headed up the East Coast, docking in Jacksonville, Charleston and Wilmington, Delaware, before crossing the Atlantic for stops including Egypt, Jordan, Saudi Arabia and Kuwait.

This paved the way for unloading of 179 armored trucks this month at Beaumont and loading 1,000 General Motors Co. cars and trucks at a Delaware port bound for overseas.

Since 2001, companies such as Maersk and Neptune Orient Lines Ltd. (NOL) have scored at least $11.5 billion in defense contracts, handling over 90 % of all military cargo to and from Iraq and Afghanistan.

What is more, American President Lines Ltd., part of Neptune Orient Lines Ltd. of Singapore, received $421 million in defense contracts in fiscal 2011.

On the other hand, as indicated by the U.S. Transportation Command, based at Scott Air Force Base in Illinois, this enabled the Defense Department to save $5.7 billion on equipment transportation costs since fiscal year 2003.

The Defense Department has spent at least $649 million on container late fees since fiscal 2001, Bloomberg said citing Senator Tom Carper, a Democrat from Delaware.

In addition, costs seem to grow even more amid Pakistan’s decision from November to close two key NATO supply routes, after a coalition air strike killed two dozen Pakistani soldiers at a border post. This has forced the U.S. and NATO allies to opt for much longer routes including that through countries such as Tajikistan, Uzbekistan and Russia.

As stated by a Navy Commander Bill Speaks, a Pentagon spokesman, the price of moving supplies through the north equals to $15,800 per container, compared to $6,200 per container through Pakistan.