Setting the Container Shipping Example
Inside Marine meets Richard Binham, Director of Trade and Marketing for Maersk Deutschland at Maersk Line.
Operating 630 container vessels, Maersk Line is the world’s largest container shipping company, with 306 offices in 114 countries, 7,700 seafarers and 22,000 land-based employees. Richard Bingham, Director – Trade and Marketing, Maersk Deutschland at Maersk Line, has worked in sales and trade roles within Maersk for over 12 years in London, Copenhagen and at his current location - Hamburg. From low freight rates, commitments to improve ship recycling in India, to the recently introduced verified gross mass regulation, his interview with Inside Marine’s Daniel Barnes covers a number of key issues globally felt across the shipping sector.
Richard, what do you consider to be your career highlights during your time at Maersk Line?
On a personal note, I am pleased to have worked with so many industry-leading professionals whom have been able to give me such a great insight to the industry. This has meant me being given many opportunities within Maersk Line over the past decade. It has also entailed a great deal of international travel, with Africa being the only region for which I have not travelled to with work.
Please tell me about your reaction to Maersk Line making Lloyd’s List’s shortlists for three awards – Company of the Year, Containership Operator of the Year and the Safety Award 2016.
These nominations are recognition of our continuous efforts to safely provide consistent and reliable service to our customers in a dynamically changing market environment. Being a global recognition, the award nominations acknowledge our service improvements around the world, not least our recently redesigned East-West Network and a number of e-commerce solutions facilitating new, smarter ways for our customers to do business with us.
So how much of Maersk Line’s orders are now booked digitally?
98 per cent of all bookings are today made digitally, with 50 per cent of Maersk Line’s bookings and shipping documentation handled by my.maerskline.com. On my.maerskline.com there +250,000 business transactions daily and the site generates US$1.5 million in revenue per hour.
How has Maersk Line reacted to its fall in revenue (2016 Q1 revenue was US$4,974 million, down from US$6,254 million in Q1 2015) and are there any positive signs regarding the current oversupply situation in containership capacity?
Capacity grew more than demand and the pressure on freight rates continued throughout the first half of 2016 in all trades. In the second half of 2016, we expect freight rates to remain under pressure due to over-capacity and low demand, although the most recent price increases seem to have settled on many trades – despite the supply and demand gap.
In Q2, the global container shipping demand growth was about two per cent compared to Q2 2015. There were some positive developments in European imports, North American imports remain solid, however large emerging economies remain challenged, while imports into Brazil, West and South Africa are weak. Global container fleet (capacity) growth was about six per cent.
We continue to pursue our cost leadership strategy and we manage our capacity tightly resulting in high utilisation. As a result, we have record low unit costs. We also maintained our lead on competition measured by EBIT margin.
On 4th November 2015, we announced a cost reduction programme aiming to reduce SG&A cost by US$250 million per year in 2016 and 2017 including reducing the work force by at least 4,000 positions. This is progressing as planned.
Over the coming 12-18 months, how many new ships will Maersk Line be introducing to its fleet?
The vessels we have ordered in 2015 will come on-stream in 2017 and onwards. In 2017, we will require new tonnage in line with our growth strategy, as well as to replace older and less efficient tonnage. Our order-book is relatively smaller compared to our competitors.
Maersk Line’s current order book comprises of 0.4 million TEU or approximately 13 per cent of our current fleet.
In 2015, we ordered 27 vessels (367,130 TEU): seven Baltic Feeder vessels for delivery in 2017; eleven 19K vessels for delivery in 2017-18 and nine 14K vessels for delivery in 2017
The contracts we signed in 2015 included options for additional vessels. We decided – as announced last year – to not exercise options for two 3,600 TEU feeders and six 19,630 TEU vessels. We have also postponed the decision regarding an optional eight 14,000 TEU vessels.
The new verified gross mass regulation was introduced on 1st July 2016. Has this had any impact on Maersk Line’s safety operations and from an industry perspective, has this new SOLAS amendment transitioned smoothly?
This amendment requires that shippers of a packed container, regardless of who packed the container, must verify and provide the packed container’s verified gross mass (VGM) to the ocean carrier and port terminal representative prior to it being loaded onto a ship. Maersk Line supports this directive, since knowing the actual weight of the cargo – as opposed to estimating the weight – increases safety across our industry.
The benefits of a properly implemented and enforced regulation can potentially avoid accidents in other parts of the international supply chain such as land transport and during loading/discharging of containers. A third potential benefit of the regulation could be increased supply chain efficiency derived from utilising the precise weight when stowing the containers.
The recent IMO circular recommending member states, and implicitly regulated parties, to be pragmatic and practical during the first three months of implementation (period of informed compliance) is a welcome statement that should enable regulated parties
to more smoothly overcome initial teething issues relating to implementation. It should be noted that it is a recommendation to member states to hold back on enforcement activities for the three month period, not an extension. We will continue to implement as planned, but will be guided by market developments and practical limitations such as especially terminal readiness and late or changing governmental requirements.
While still early days we have so far seen no significant VGM-related disruptions in the global supply chain. Still there is a lot of work ahead across the entire supply chain in order to secure a successful implementation. For all parties to continue the current, solution oriented approach across the industry – especially during the period of informed compliance – remains key to the successful implementation of the VGM and the benefits it will ultimately bring in terms of increased safety.
On the subject of ship recycling, Maersk Group this year announced its intentions to send vessels to Alang, India’s beaching shipbreakers, and to work with Alang’s yards to improve conditions. Why the U-turn, and what is Maersk doing to improve facilities and safety since this decision was made?
The Maersk Group wants to play a role in ensuring that responsible recycling becomes a reality in Alang, India. In the coming years, the Maersk Group will work directly with selected certified yards in Alang to further upgrade their facilities and practices to comply with the company’s standards.
With more vessels to recycle in the future the current cost of sustainable ship recycling is not feasible. Currently, the estimated extra cost for Maersk Group of responsible recycling at existing yards is US$1-2 million for each vessel.
We have witnessed steady improvements of conditions in ship recycling yards in Alang in the last couple of years and today a total of four yards in Alang are certified to the standards of the IMO and Hong Kong Convention.
Following several visits at these upgraded beaching facilities in Alang in 2015, the Maersk Group concluded that responsible recycling can be accelerated in the area, if the engagement is made now.
What initiatives does Maersk Line have in place to ensure the welfare of its seafarers?
It is all the result of joint efforts by offshore and onshore staff based on Maersk Line’s new, recently implemented safety strategy. Clear management commitment, focus on leadership training of senior officers and a continuous improvement drive are important elements of this strategy and play a key role in creating a strong and positive safety culture in the organisation.
We are also upgrading safety features on our new buildings, including an improved firefighting system, in order to create a safe environment for our seafarers, vessels and cargo. Maersk Line also plays a key role in the Container Ship Safety Forum (CSSF), where various container ship managers collaborate to advance the continuous improvement of safety culture and performance in the container shipping industry.
These are of course only some of the examples. Maersk Line’s vessels are also equipped with many features that make life at sea easier and more pleasant for seafarers.
Since the Panama Canal Expansion was completed, what routes have predominantly benefited from the shorter shipping times?
We welcome the expansion of the Panama Canal. Enabling significantly larger vessels to transit the canal present new opportunities to shipping lines and will contribute positively to trade development in the region. The Panama Canal is significant for our overall operations and with around 300 transits a year, Maersk Line is an important customer.
The expansion provides us more options to a number of our services, most notably our Asia to US East Coast routes. We have not yet finalised our plans but it is likely we will make increased use of the expanded Panama Canal and adjust one or more Maersk Line services with larger vessels to begin sailing through its new locks.
We will continue to use both the Panama and Suez Canals in the future. At any point of time we evaluate the best routing options for our services. When assessing the Suez, Panama or any other canal option, transit time is but one parameter. Size constraints (vessel draft, length, breadth and height), safety, port infrastructure at either side of the canal, and of course price is also taken into consideration.
What aspects of the future development of Maersk Line excite you the most?
Digitisation and the way it is revolutionising shipping is definitely one of the most exciting trends and is a key element of Maersk Line’s transformation. We aim to improve our customer experience to provide the best value for money.
The overall aim is to transform Maersk Line into a lean and simple organisation that services its customers digitally. We embarked on this journey in 2012 and it includes transformation projects within standardisation, automation and digitalisation of processes.