PIL ready to move up to become 'B-division' player

Shipping line PIL operates nearly 180 vessels as one of the largest private shipowners in South-east Asia today and is the 15th-biggest container shipping line globally.
Shipping line PIL operates nearly 180 vessels as one of the largest private shipowners in South-east Asia today and is the 15th-biggest container shipping line globally.PHOTO: PIL
Mr Teo Siong Seng, managing director of PIL, is optimistic the shipping industry will see better days ahead. Shipping line PIL operates nearly 180 vessels as one of the largest private shipowners in South-east Asia today and is the 15th-biggest conta
Mr Teo Siong Seng, managing director of PIL, is optimistic the shipping industry will see better days ahead. PHOTO: PIL

Local shipping line to add 12 new container ships, boosting overall capacity to 500,000 containers by 2018

Home-grown shipping line Pacific International Lines (PIL) is ready to sail into exciting new waters by becoming a bigger player, even as the industry grapples with one of its longest, deepest downturns.

The company - today marking its 50th birthday - is set to add 12 new container ships to its current fleet of about 180, expanding its overall capacity to 500,000 standard-sized containers by the end of next year. The addition of the new vessels will position PIL firmly as a "B-division" player in the industry - up from its "C-division" status now, managing director Teo Siong Seng said in an interview yesterday.

"A-division" players would include carriers with a capacity of more than one million containers, in the likes of giants Maersk Line and Mediterranean Shipping Company.

"We will be comfortable to operate at this size and there are only a handful of companies like this," said Mr Teo, who is better known in industry circles as S.S. Teo. "At the moment, we don't have any ambition to go into the next phase as we're still a private company and capital is limited. We may in future, but I think we still have to be quite cautious for now."

PIL's plans to scale up comes at a time when the industry continues to be plagued by problems, including severe overcapacity.

Mr Teo acknowledged that the last five to 10 years have been "very difficult" - with last year the worst, having witnessed "five weddings and a funeral" across the industry.

He was referring to the flurry of mergers and acquisitions that have taken place, including CMA CGM's $3.38 billion buyout of Singapore's Neptune Orient Lines, and the bankruptcy of South Korea's Hanjin Shipping as the "funeral".

"The market has not seen such volatility in its history. But it's at times like these that it is all the more important for us to remain focused, to not panic and try to find ways to survive," he said.

Indeed, PIL appears to be holding up well amid the downturn. Mr Teo said the company has not retrenched any of its 18,000 staff globally, including 700 in Singapore, at a time where even Maersk Line, the world's No. 1 shipping line, is cutting 4,000 jobs from its land-based staff of 23,000.

He declined to disclose profit figures, but said the company has seen a "marked improvement" in its performance since the end of last year.

PIL, set up in 1967 with just four coastal vessels, operates nearly 180 vessels as one of the largest private shipowners in South-east Asia today and is the 15th-biggest container shipping line globally.

Mr Teo attributed the company's resilience to its nimbleness. "Our competitive advantage is our agility and mobility," he said.

The company has scaled back and pulled out of certain trading routes in Europe and Latin America in the last few years, such as when freight rates for shipping cargo from Shanghai to Brazil plunged to US$25 (S$35) from off-season rates of about US$1,000.

But it has also entered new, niche markets in which the bigger players are less involved, such as with the acquisition of Mariana Express Lines in March 2015, which allowed it to strengthen its services in the Western Pacific region.

To gear up for its next growth phase, Mr Teo said PIL is looking at adopting a range of digital technologies - from data analytics to blockchain to Internet of Things - to beef up its operations. It aims to roll out its new IT system by May, which will come with features that allow it to better track booked containers and their return, for example.

It is also working with trade agency International Enterprise (IE) Singapore to build up more capabilities like this, as well as boost its connectivity in markets across China, South-east Asia and Africa as it moves towards becoming an end-to-end supply chain solutions provider.

Mr Teo is optimistic the shipping industry will see better days ahead, and that a supply-demand equilibrium could come into play by next year. The company, for instance, is already seeing demand from Africa pick up. "This year will be better than last year, though not a big jump, but a gradual and steady recovery," he said, adding that PIL expects to emerge from the downturn as a stronger player with better market penetration.

A version of this article appeared in the print edition of The Straits Times on March 16, 2017, with the headline 'PIL ready to move up to become 'B-division' player'. Print Edition | Subscribe