Why shipping lines are eyeing China

The reason is simple: economics. On one hand, the liners want to reduce costs by using bigger ships and on the other strong trade relationships have developed between Latin America and Asia providing increasing cargo in a period when traditional economies are stagnating. In addition, most of Latin American ports have expanded and dredged their facilities to allow them to handle post-panamax vessels.

Starting from 4 May, Cosco, Evergreen, Pacific International Lines and Wan Hai Lines have launched a new weekly service linking Asia and the west coast of South America, called Asia-South America Service (WSA2). The service calls Mexico, Honduras, Peru and Ecuador in Latin America and the round-trip time will be 63 days. The WSA2 service will initially deploy nine panamax vessels supplied by the four carriers.

Separately, Evergreen has joined forces with Cosco and ZIM to upgrade the fleet operating its Asia - South America service (ASE) linking China, Singapore and South America’s east coast, calling Brazil, Uruguay and Argentina. Meanwhile MSC launched its Ipanema service in April which adds about 9,000 teu every week on the Far East-South America East Coast. The ASE service will deploy 10 ships of 8,500 teu, replacing the existing fleet of 3,000 teu vessels.

If we look at the two continents’ economic ties, Chile has become China’s second-largest trading partner in Latin America and the second biggest source of imports, particularly copper. Trade between China and Chile hit $33Bn by end 2012 and China is Chile’s biggest trading partner with which it signed a Free Trade Agreement (FTA) in 2006.

Peru, that also signed an FTA with China in 2009, has seen increased commercial relations and Chinese investments jump dramatically. Chinese investments, mostly in mining, are now over $3Bnand expected to rise 10-fold in the next five to six years, Peru’s Minister of economy and finance said at the end of last year. Trade was valued at $12Bn in 2012, Peru’s main exports to China are copper, iron, aluminium, fishmeal, and grapes.

China is Brazil's biggest trade partner, with investments now totalling $25bn even though it did not sign an FTA until last year that opened the Brazilian market to Chinese goods. China, that has an extraordinary appetite for Latin American commodities, mainly minerals, and now accounts for 19% of Brazil’s total trade as compared with 2.8% in 2001

By 2014, China will overtake the European Union as Latin America’s second largest trading partner after the United States. As long as China continues to feed on Latin American exports, shipping lines will find an increasing source of cargo to load their ever-larger vessels.

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Why shipping lines are eyeing China - Latin America trade