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Shipping globally
by ArabianBusiness.com staff writer on Thursday, 01 November 2007
With a rich heritage, Danish-owned Maersk Line is firmly established as a leader among liner shipping companies in the world. With a fleet numbering more than 500 container vessels and more than 1,900,000 containers, the company tops the global container shipping league, and has been growing its regional business rapidly over the last two years.
This year the Middle East region is expected to grow faster than any other market in the Maersk network. If this bold target is achieved, Maersk Middle East alone will handle the same volume by 2009 that the Maersk Line handled globally 10 years ago. With a renewed vigour following a transitional phase for the company, and a huge commitment to customer-focussed, cost-conscious shipping, the company is confident it is well placed to deliver further outstanding performance.
Growth should not just be a target in itself. It’s critical that the expansion is profitable.
The region has certainly contributed to the growth of Maersk Line, and Middle East trade now accounts for 10% of the total trade volume handled by the company, according to Marc Gijsbrechts, Maersk CEO for the Middle East.
The company has moved away from the third party agency-based model and now operates own offices in nearly all of the countries that fall within the Middle East remit. The regional headquarters, located in Dubai, is responsible for centrally managing the offices in Iran, Kuwait, Bahrain, Qatar, Saudi Arabia, UAE, Oman, and Jordan. "In these countries we have our own people on the ground, the notable exceptions being Iraq where we operate through a handling agent because of the security situation, and Yemen where we still operate with a third party agency," explains Gijsbrechts.
The Middle East area is far from content to rest its successes and is determined to grow the business across the region. "We are constantly looking at adjusting and improving our network based on new opportunities that come up," he says. Recently the group has opened new offices in Sohar, Oman to capitalise on developments there, and also in Saudi Arabia's booming Jubail industrial complex, to support dynamic petrochemical infrastructure investments.
"We are a fairly big carrier of petrochemical goods, so we thought as a forward looking strategy it was important to be there. All the cargo we carry is moved in containers. We don't control any breakbulk operations from this office," says Gijsbrechts.
By harnessing the containerised shipping of petrochemicals, the group has propelled the Middle East to being the fastest growing area for the company worldwide.
Exports and imports business for this year is on track for growth in excess of 20% compared to 2006, which is in line with the group's overall expectations for the region.
Despite tremendous growth of the regional outfit Gijsbrechts is keen to point out that size is not everything in shipping. "Of course, the Middle East growth is encouraging, but I would say that growth should not just be a target in itself. It's critical that the expansion is profitable."
As container shipping is becoming increasingly commoditised as a product, tight controls on costs are critical. The watchwords for Gijsbrechts and his team are low cost and high productivity.
"It would be fair to say we are quite cost and productivity driven in the Middle East. If you look at the results of most of the major carriers for the last financial year, to be sustainable it is clear that freight rates do need to go up."
Whilst the record high bunker price has had a big impact on the levels of profitability for the industry, Gijsbrechts is keen to emphasise that this is not the sole factor in controlling costs.
"The high fuel cost is one element, but we as a carrier have a responsibility to keep our costs as low as possible," he says. Maersk has been proactive in tackling the issue and recently launched an initiative in the US that was focussed on reducing costs by scaling back inland operation, making the business more efficient. "The important thing for us was to ensure our customers requirements were still met, but at the same time being at the lowest cost. In this region we've been very active at scrutinising our costs and examining where we can remove excess from the system."
In 1995 Maersk Line handled approximately one million containers, and this year the group is on target to handle six million. In a little over a decade six-fold growth has posed challenges of its own. "You could say that we're a company in transition right now. We realised that we wouldn't be able to handle those volumes in the same way that we did business ten years ago." Deploying new IT and management systems has been at times uncomfortable for the firm, but Gijsbrechts is confident the company has emerged from the process stronger and better prepared for the future.
"We've gone through a major transition in system use, which involved some difficult times in implementing all of these changes, so we should thank our customers for being patient with us."
Maersk Facts: EMMA MÆRSK
• The main engine of a PS-class vessel such as the EMMA MÆRSK produces 109,000 horsepower, equal to that of 1156 family cars. A PS-class vessel can carry 11,000 full 20-foot containers (each at 14 tonnes), equal to a train 71 kilometres long.
• The anchor of a PS-class vessel weighs 29 tons, equivalent to five adult African elephants. A PS-class vessel sails approximately 170,000 nautical miles every year, equal to 7.5 times around the world.
• EMMA MÆRSK travels 66 kilometres using 1 kWh of energy per ton of cargo. A jumbo jet travels half a kilometre using the same amount of energy per ton of cargo.
• Environmentally friendly silicone paint covers the hull of the vessel below the waterline - reducing water resistance. Maersk Line claims this will cut the vessel's fuel consumption by 1200 tonnes per year. The hull of EMMA MÆRSK is coated with biocide-free silicone based antifouling paint.
• EMMA MÆRSK and associated PS Class vessels are equipped with an advanced energy efficiency system, waste heat recovery system, and an electronically controlled engine, features which all contribute to fewer emissions through reduced fuel consumption. The inboard protected fuel tanks are a preventive initiative to avoid oil spills.
• The main engine of a PS-class vessel such as the EMMA MÆRSK produces 109,000 horsepower, equal to that of 1156 family cars. A PS-class vessel can carry 11,000 full 20-foot containers (each at 14 tonnes), equal to a train 71 kilometres long.
• The anchor of a PS-class vessel weighs 29 tons, equivalent to five adult African elephants. A PS-class vessel sails approximately 170,000 nautical miles every year, equal to 7.5 times around the world.
• EMMA MÆRSK travels 66 kilometres using 1 kWh of energy per ton of cargo. A jumbo jet travels half a kilometre using the same amount of energy per ton of cargo.
• Environmentally friendly silicone paint covers the hull of the vessel below the waterline - reducing water resistance. Maersk Line claims this will cut the vessel's fuel consumption by 1200 tonnes per year. The hull of EMMA MÆRSK is coated with biocide-free silicone based antifouling paint.
• EMMA MÆRSK and associated PS Class vessels are equipped with an advanced energy efficiency system, waste heat recovery system, and an electronically controlled engine, features which all contribute to fewer emissions through reduced fuel consumption. The inboard protected fuel tanks are a preventive initiative to avoid oil spills.
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