MAERSK SETS SAIL FOR LOGISTICS ON LAND AS SHIPPING RATES SLUMP
Maersk Line, the world’s biggest shipper, is planning to expand into the Australian logistics market and add other services to its port calls as it battles low freight rates and financial losses.
“We’ve got a vision to be the global integrator of container logistics,” Gerard Morrison, managing director of Maersk’s Oceania business told The Australian Financial Review.
“Shipping and logistics can be quite fragmented – multiple parties, multiple documents, multiple invoices – but we’re hoping to find ways to simplify that.”
Maersk, like other shipping lines, has been struggling with falling freight rates, reporting a net loss after tax of $US376 million ($493 million) in 2016 despite slashing costs and increasing volumes by around 9 per cent. Its average freight rates dropped around 19 per cent over the year. Some competitors could not cope with the pressure on prices, with Korean shipping group Hanjin collapsing into bankruptcy.
In June, Maersk’s owner, Copenhagen-listed conglomerate AP Moller-Maersk, which reported a net loss of $US1.9 billion for 2016, put the shipping line’s CEO, Soren Skou, in charge of the global group and ordered a strategic review. In September, AP Moller-Maersk, which had previously operated several different businesses, said it would split into two groups: energy, and transport and logistics.
The energy group includes Maersk’s oil, drilling and tanker businesses, while the transport and logistics group includes the shipping line and several other businesses – APM Terminals, which operates in 36 countries; freight forwarding group Damco; towage and salvage group Svitzer; and a container manufacturing business.
Mr Skou wants the businesses to work closely together instead of operating as silos. In Australia, Maersk is thinking of how the shipping line and Damco “could help each other”, Mr Morrison said, adding that bundled services could be offered to customers such as retailers and produce exporters.
“At the moment, shipping is ‘shipping from port to port’ and the thought is, how can we help our customers deal with other parts of the supply chain?”
Offering logistics services such as container storage, customs clearance and trucking in Australia could involve making acquisitions, although purchases of other companies are unlikely in the immediate future, Mr Morrison said. “If the right opportunity was there, we wouldn’t look away from it.”
Maersk has been expanding its services in Australia, sending a container ship, the Searuby, to Tasmania for the first time in February. The ship will call regularly at the port of Bell Bay, enabling Tasmanian producers, including seafood exporters, to send products around the world on Maersk ships via connections in Melbourne and New Zealand.
The line is calling more frequently at Adelaide, which is shipping more wine to China, and is “keeping a close eye” on Darwin to see if starting services to the northern port would be worthwhile, Mr Morrison said. “It’s a very small market but it’s growing really fast … geographically-speaking, Darwin would be a fantastic place to be able to get in and out of.”
Maersk, which has a 15 per cent share of the global container shipping market, is also targeting acquisitions to boost scale, announcing a deal in December to buy German container shipping line Hamburg Sud. If the deal is approved, Maersk will be able to expand its range of shipping destinations.
Global shipping volumes are now improving, partially driven by strengthening economies in Europe and Latin America, Mr Morrison said. “Australia and New Zealand are doing very well, there’s very steady growth out of both markets …customers are asking us to carry more and more cargo.”
To keep costs low for customers, Maersk is trying to transform what Mr Morrison describes as an “antiquated industry” by investing in technology. In December it announced a partnership with Chinese e-commerce group Alibaba that will allow users of the site to book space on Maersk ships.
Traditionally Maersk has dealt with big companies, with smaller and medium-sized businesses finding difficult to get direct access to shipping services. If trials with Alibaba go well, Maersk will consider forming similar partnerships in other countries, he said.
It is also collaborating with IBM to digitalise the paperwork associated with shipping contracts, so it can reduce costs and enable goods to be processed faster by regulatory bodies. And last year it put digital chips inside refrigerated shipping containers that are tracked by satellite, allowing customers to monitor the temperature of the containers.
Source: Australian Financial Review