Maersk Line, the world’s largest shipping line and also a major customer of Port of Tanjung Pelepas (PTP), is not too worried about the terminal expansion capability in the near future due to the reclamation works of the massive Forest City Project in Tanjung Kupang.
Rumours are rife that PTP – a 70% subsidiary of MMC Corp Bhd and 30% owned by APM Terminal, a port-operating arm within the Maersk Group – may face difficulties in its expansion in the long run beyond its phase three expansion plan as the Forest City Project is lapping over its port concession area.
The ambitious Forest City project involves the development of 2,000ha man-made island – which will be bigger than Pangkor Island and will take three decades to complete to be developed by China’s Country Garden and its partner Johor state company Kumpulan Prasarana Rakyat Johor.
Maersk Line newly appointed cluster manager for Malaysia, Singapore and Brunei Dan Lauritzen tells StarBizWeek that the port expansion limitation that may stem from the project is not an immediate concern.
“In the very far future, there might be certain limitation but for now we and our terminal partner are quite comfortable with the capability and capacity of each other,” he says.
PTP in 2012 embarked on a RM1.4bil expansion programme to cater to the new-generation 18,000 TEU vessels.
With the completion of Berth 13 and 14 in the second quarter of this year, PTP’s capacity is expected to grow by 25% to 10.5 million twenty-foot equivalent units.
PTP handles around 7.7 million twenty-foot equivalent units (TEUs) a year.
PTP has managed to entice Maersk Line to make the port as its regional transhipment hub, moving away from Singapore in 2009 and now Maersk contributes to around 1200 vessel calls at the terminal on annual basis.
“We have been using PTP for more than 10 years as our main transhipment port in South-East Asia and we remain committed to using the port,” says Lauritzen.
Maersk with its 10 Triple-E, 18,000 capacity ships plying in seas now, has a 17% market share in Malaysia and 13% to 14% global market, excluding intra-Asia trade.
Besides PTP, Maersk ships also call to Port Klang, Kuantan, Penang, three port in East Malaysia as well as Singapore.
On the blocked P3 Alliance, Lauritzen says Maersk now has forged a conventional vessel sharing agreement with Mediterranean Shipping Co (MSC) that should start by early next year.
Dubbed as the 2M, he points out that both shipping companies now will be able to operate large vessels without adding more capacity to an already flooded market.
“For us, we will be able to offer better ports’ coverage, greater flexibility and more frequent calls to ports to our customers,” he says.
Recently, China has blocked the formation of the global shipping P3 alliance comprising Maersk Line, Mediterranean Shipping Co (MSC) and CMA CGM – Europe’s three biggest shipping companies that collectively control close to 50% of Asia-Europe shipping trade.
On the outlook of the shipping industry, Lauritzen admits that it is still very challenging.
“There is abundance of capacity to match with moderate demand growth.
“We expect global container volumes to grow between 4% and 5% for this year. In the second quarter alone, nominal capacity grew at 5.3%, which is in line with container demand (which grew at 5%).
“Nevertheless, global capacity remains abundant compared to demand.
“Averagely, the return on capital for the shipping industry has been nearing to zero for the past ten years as freight rates have been weak despite the current seasonal spikes.
“For shipping lines, it’s a cost game now where it has to be reduced faster than the rates decline,” he says.
Despite the choppy waters, Maersk as market leader has managed to stay afloat with quite a good set of financial results for the past two years says Lauritzen.
“We have just announced our second quarter results and we did quite well that Maersk has adjusted its forecast for the full year above the previous year.
“We will still be committed in our effort to reduce cost and improve our customers’ experience,” he says.
Besides embarking on building bigger environmental friendly vessels to bank on economies of scale to maximise profit, Maersk is also an advocate on slow steaming sea journey to save cost on fuel.
The Maersk Group achieved a very satisfactory result for first half of this with underlying profit increasing 42% to US$2.4bil, mainly driven by Maersk Line, APM Terminals and Maersk Oil.
“As result of the good progress in delivering on our group priorities and the solid financial performance across the group, which has been achieved in challenging markets, we upgrade the outlook for the Group result to be around US$4.5bil for 2014,” says group CEO Nils S. Andersen in a recent statement.