Room for shipping industry 'to consolidate further': Maersk executive

Maersk COO Soren Toft said focus should be on value-added services such as improving turnaround times in port.
Maersk COO Soren Toft said focus should be on value-added services such as improving turnaround times in port.

There is still room for more buyouts in the shipping industry despite recent mergers, according to a senior industry executive.

Maersk chief operating officer Soren Toft told a media briefing that mergers and acquisitions will become more important as growth in the shipping industry slows.

Maersk Line in April announced it would buy out German competitor Hamburg Sud for €3.7 billion (S$5.96 billion), a deal first mentioned last December. It followed the proposed operations merger of Japan's three biggest shippers.

"We expect that within - I cannot give a timeframe on it - that you will see maybe a handful of shipping companies, a little bit similar to what you see in the courier express and parcel industry, where there're really, you know, three global companies," Mr Toft said.

But he advised against speculating on future deals in the making. "We have our hands full with Hamburg Sud, so that's where we're putting all our energy."

He noted that the firm does not plan on buying new boats to build up its fleet. "Our belief in Maersk is that the order book is more than sufficient because there is an idle fleet out there and growth is at a different level."

Mr Toft also said the changing market calls for a different business approach. He maintained that companies must move beyond competing on costs or on vessel size, and could, instead, focus on value-added services such as improving turnaround times in port.

Gone are the days of mega-vessels, he said - if not forever, then at least for the foreseeable future. "The bigger that ships become, the more you have a problem offering the frequency and breadth of service that you otherwise can do."

Maersk has turned to digital solutions - for example, a remote management system that connects refrigerated containers to a satellite network, to track and adjust conditions like temperature and humidity.

Still, he added that service solutions can sometimes be simple and low-tech, citing stepped-up collaboration between Maersk and the port authorities here. They now work on developing plans together when a ship pulls in, rather than engaging in back-and-forth conversations.

"It's not only about having smart assets, more fuel-efficient assets. It's also about having an infrastructure where we arrive in Singapore, the port turnaround becomes efficient," he said.

Despite Maersk defecting to Malaysia's Tanjung Pelepas, Mr Toft was quick to emphasise the value of coordination here as well.

"We are, in my view, cooperating very well together and both parties think about our business not in 'what happens in the next six months?' but 'what happens in the next 10 years?'."

He added: "If you can do this better than anybody else and differentiate, actually you can become the best (port) operator, something that I think PSA many times can correctly claim."

A version of this article appeared in the print edition of The Straits Times on September 18, 2017, with the headline 'Room for shipping industry 'to consolidate further''. Print Edition | Subscribe