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Shipping Economics – low cost wins

Comments Off on Shipping Economics – low cost wins

Vancouver: Today’s Maritime CEO comes from our sister title, SinoShip, the leading media outlet for all things China maritime. On the cover of the tenth issue of SinoShip magazine is Gerry Wang, the head of Seaspan.

Anyone who has ever met Wang cannot fail to have clocked his true enthusiasm for the sector he is in, container shipping. He’s quick to engage, discuss, and even argue points of view on the industry he is so passionate about. maritime recruit

As one of the most successful players in the container segment of the last dozen years, Wang’s world view is decidedly optimistic.

“The container industry is a global infrastructure industry connecting manufacturers with consumers, the cornerstone of globalisation,” he insists. “Without container shipping there is no globalisation, there is no Walmart. Container ships make up the new Silk Road connecting China with the rest of the world.” maritime recruit

Wang is quick to dismiss talk of overcapacity in the industry when we meet up.

The total orderbook is some 22% of the extent fleet, he points out, which spread over three years is little more than 7%. “That is not much,” says arguably the world’s best-known container tonnage provider. Wang claims the orderbook today is actually near a historic low. Moreover, when one takes into account effective loading of a typical boxship, a fifth can be knocked off that figure, he maintains.

“Certain tradelanes have an imbalance, but overall there is no oversupply,” he stresses. maritime recruit

So then, why the lousy freight rates, if there is not overcapacity? Here, Wang is in his element, quick as a flash, with a lengthy reply on the travails of the industry and the solutions at hand. maritime recruit

“The industry has structural problems that it must deal with,” he says. Pointing to the creation of the P3 alliance between Maersk, CMA CGM and MSC, Wang says such collaboration is the way ahead. “The industry is going towards a more systematic approach to business,” he says. “Container shipping is not like dry bulk or tankers, it is more like the airlines,” he says, noting how airlines cope with capacity much better and how they work better through alliances.

Wang reckons the container industry is now in the process of copying what the airline industry has done and this should address the structural problems it has.

“Lines need to work together and learn their lesson from the past,” he says, adding: “They need to become more united to make better economic returns. This industry cannot survive if they continue to lose like money like they have.”

Wang was born in China’s Anhui province in 1962. Educated at Shanghai Maritime University and then the London School of Economics, he started out with China Merchants Group in Hong Kong. In 1990 he moved to Vancouver and a few years later joined Seaspan, owned by the billionaire Ted Washington. It was here that he linked up with China Shipping to get their containerline up and running by taking leases from Seaspan. From there, the leasing model he established snowballed. Seaspan went public in 2005, raising $700m. maritime recruit
Seaspan’s fleet now numbers 87 ships with a total capacity of 606,300 teu. The largest ships on its books at the moment at 14,000 teu, and Wang acknowledges even larger ships are a necessity, an “unstoppable trend”.

“You have no choice,” he says. “You have to get them as they give you economical means. Whoever has the economical means wins the battle.”

This battle for scales of economy is also bringing in an era of consolidation for the sector, something that does not surprise Wang at all.

“It is all about per teu costs. It is all about survival, arriving at the lowest teu costs,” he says. “If you can partner with someone to reduce your costs then go ahead.”

As for Seaspan itself, don’t expect this Canadian firm to hang around.

“We will continue to grow,” Wang says. “This industry is simple – if you don’t grow you will be left behind. My investment theory is whatever works to become stronger, more profitable.”

Seaspan has stuck with the same philosophy over the past decade, he says, namely chasing long-term contracts with reliable, financially secure clients and always seeking the latest, modern, fuel efficient ships. “It’s a recipe for success,” says Wang with a knowing chuckle. [19/05/14] maritime recruit

Source: http://www.maritime-ceo.com/News/Seaspan:-The-plane-truth-about-box-shipping/3w3c356.html

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