Shipping industry in need of consolidation?
"The shipping industry is incredibly fragmented and very capital intensive... when you add these characteristics together, you have the perfect recipe for low margin and intense competition," said Jesper Praestensgaard, chief executive, Asia Pacific, Maersk Line. "That would [cause companies to] focus on consolidation."
Praestensgaard said at a Sea Asia conference held in Singapore between 21-23 of April that 50 years ago, some very far-sighted and visionary individuals who thought they could standardise and simplify what was at that time a very costly, error prone and unsafe mode of transportation, transformed the shipping industry into today's containerised transport.
"We have come to a point whereby we can no longer drive anymore efficiency into the industry unless we standardised," said Praestensgaard.
Praestensgaard continued, "Standardisation and simplification is not going to happen if the industry [remains] fragmented. Therefore I do think that mergers and consolidation are actually going to happen and this is for the benefit of the entire industry and customers."
However, Randy Chen, special assistant to the president, Wan Hai Lines Limited, disagrees with the notion of consolidation.
"I certainly don't see consolidation as a priority right now. We certainly have other [more pressing] issues on our plate [currently]," Chen said.
Praestensgaard said, "This is important because we currently have an industry that is still too unreliable in terms of serving our customers. There are still too many processes that are customised and are therefore error prone and drive up cost."
Eng Aik Meng, president of APL, also present at the conference said, "Considering current economic conditions, consolidation sounds like a viable option. But take into consideration that assets are available on the cheap; the choice is between going out merging and acquiring a company versus buying assets on the cheap... This is going to be tough decision because between the two, many people would rather invest in cheap assets and this is not going to help consolidation."
Singapore- The shipping industry could be saturated to a point whereby liners can no longer drive efficiency into the sector, unless standardisation and simplification is introduced through consolidation, said a top Maersk Line executive."The shipping industry has the ultimate perishable commodities, is incredibly fragmented and is very capital intensive... when you add all these characteristics together, you have the perfect recipe for low margin and intense competition," said Jesper Praestensgaard, chief executive, Asia Pacific, Maersk Line. "That would [cause companies to] focus on consolidation."
Praestensgaard said at a Sea Asia conference held in Singapore between 21-23 of April that 50 years ago, some very far-sighted and visionary individuals who thought they could standardised and simplify what was at that time a very costly, error prone and unsafe mode of transportation, transformed the shipping industry into today's containerised transport.
"We have come to a point whereby we can no longer drive anymore efficiency into the industry unless we standardised," said Praestensgaard.
Praestensgaard continued, "Standardisation and simplification is not going to happen if the industry is fragmented. You need someone who can chart the way for the benefit of everybody. Therefore I do think that mergers and consolidation are actually going to happen and this is for the benefit of the entire industry and customers."
However, Randy Chen, special assistant to the president, Wan Hai Lines Limited, disagrees with the notion of consolidation.
"I certainly don't see consolidation as a priority right now. We certainly have other [more pressing] issues on our plate [currently], Chen said.
Praestensgaard said, "This is important because we currently have an industry that is still too unreliable in terms of serving our customers. There are still too many processes that are customised and are therefore error prone and drive up cost."
Eng Aik Meng, president of APL, also present at the conference said, "Considering current economic conditions, consolidation sounds like a viable option. But take into consideration that assets are available on the cheap; the choice is between going out merging and acquiring a company versus buying assets on the cheap... This is going to be tough decision because between the two, many people would rather invest in cheap assets and this is not going to help consolidation."