MENAFN - Arab News
Saudi Arabia shipping industry 'sailing through exciting times'
Sunil Joseph, managing director, Mercantile Shipping Agencies Ltd., during an interview with Arab News at his head office in Jeddah.
(MENAFN - Arab News) Maersk Line is increasing port calls from/into Saudi Arabia in 2013, and providing faster and direct connections to the Saudi customers for managing their supply chain more optimally. Simplification of cargo flow and related processes can reduce the supply chain costs of customers in the Kingdom.
Maersk Lines' new investments focus on sustainability and innovative ideas, taking into consideration social and environmental obligations.
The shipping industry in Saudi Arabia is passing through some exciting times due to the impressive growth and huge potential it holds, said Sunil Joseph, managing director of Mercantile Shipping Agencies Ltd., in an exclusive interview with Diana Al-Jassem of Arab News.
Joseph says significant investments have gone into making these mega ships, which will be the biggest in the world in terms of capacity and environmental impact when they come out.
According to Joseph, the global shipping industry has been suffering from poor financial returns since 2008.
The following are excerpts from the interview:
With more than 750 port calls scheduled this year, what are the major plans for Saudi Arabia?
The increasing port calls is an illustration of Maersk commitment to our Saudi customers. In other words, we are making faster connections to the emerging markets and providing best in class shipment opportunities to key markets from/into Saudi Arabia. This has been managed through close working process with our valuable customers who share their concerns in global supply chain requirements.
Maersk vision is to play a key role in the growth of Saudi trade. What further steps do you plan to actualize this vision?
Being a leading shipping line, Maersk has a role to play in promoting trade and commerce. We focus on growing markets for our Saudi customers, and we support with adequate shipping capacity, equipment supply, fast connections and, very importantly, the best in class product and services. We work together with our customers in understanding the market trends, their concerns and address them optimally possible. Additionally, we work closely with the port management and related stakeholders for driving improvement initiatives.
Maersk is looking forward to assisting the growth and development of trade in the Kingdom. What kind of deals Maersk has signed?
We have in our clientele key exporters and importers across Saudi Arabia, whom we are actively engaged with for providing high quality products and services to meet their global transportation requirements. We facilitate in the supply chain optimization, which is critical in the current economically challenging times, and particularly when the landside services are highly vulnerable lately.
How do you evaluate the shipping industry worldwide? Have the political changes in MENA affected the shipping movement negatively?
Global shipping industry is suffering from poor financial returns consistently. The industry is making far less than desirable returns, and being capital intensive it merits a complete overhaul of the operations. If the industry does not change the course of trends, I'm afraid there will be challenges at getting further capital and investments as the returns are simply not justifiable. The political changes in MENA have impacted shipping as the imports have been impacted negatively. Any kind of unrest negates growth and creates challenges for commerce, which the recent developments have actually done.
What type of commercial activities Maersk does in the Middle East, especially in Egypt, Syria, Turkey, and in North African countries?
We are present and operate in all these countries. Some of them have relatively higher focus being emerging markets with impressive economic developments. Maersk will continue to offer reliable service to our valuable customers in these countries as well worldwide.
How does Maersk see Saudi cargo laws in terms of shipping movement?
The world has changed, customer behavior has changed, customer demands have changed and shipping has to change as well. The process needs to be reviewed consistently as we compete with other markets and gateway ports across the region as well. We need to facilitate cargo flows for Saudi importers and exporters, and this demands a review of current processes from a simplification standpoint. It is critical to maintain the high growth trend. While a lot has been done in the last couple of years, considering the pace of growth in this country in particular, these changes are not good enough to sustain the growth. More needs to be done and can actually be done to simplify processes. I am aware there are initiatives and studies under way in this direction, which is quite encouraging.
Maersk's goal is to implement a smooth cargo process. How would you work to achieve this goal?
We work to reduce wastage, increase productivity and bring in efficiencies in the cargo flow and related processes. These are not limited to ours only, but also for those associated with us being our stakeholders. In other words, we look at opportunities to constantly improve own processes, the hand over points and interlocked dependencies. For example, we have been working on providing a fast track cargo clearance process for our customers together with our terminal partners. We are sharing best practices from other ports effectively offering suggestions on increasing productivity and related efficiency. We bring innovation to the industry, for example, by using the non-operating reefer containers for dry commodities for equalizing the growing container imbalance witnessed in the country.
What is Saudi Arabia's position among GCC countries in terms of cargo? Which is the biggest market and why?
In terms of the containerized cargo flow, Saudi Arabia is the second largest market in the Middle East region. However, in terms of volume growth Saudi Arabia is the fastest. The biggest market in the Middle East region is the UAE and primarily due to the business-friendly environment it offers, which has assisted the development into a major hub for cargo distribution. The fact is Saudi Arabia is the largest consumer market and the fastest growing across the GCC, coupled with the highest consumer confidence for many years consistently now. I have no doubt that Saudi market will be the largest within a short span of time. The key is that all partners in trade and commerce must work jointly and collaborate to combat the challenges that affect supply chain negatively.
Maersk Group has joined the World Ocean Council (WOC) to support the global leadership and collaboration on ocean sustainability in 2011. As a member of the WOC, What are Maersk's solutions for the environmental challenges facing the ocean business community?
Talking of the environment, CO2 emission is the most critical element affecting global climate change. Maersk Line has invested significant amount of resources to address this concern over the past couple of years. Low Carbon leadership is a key pillar for ML sustainability and we set a target to reduce our CO2 emissions globally by 25 percent by end 2020 (from 2007 baseline). We are proud to say that we have achieved this target of 25 percent reduction by 2012, eight years ahead of schedule. We have now set a new reduction target of 40 percent CO2 by 2020 (from 2007 baseline). I am aware that the environment is a priority in Saudi Arabia and Maersk is proud to be associated with a country that holds environment concerns high on its agenda.
How did we achieve this, or what were the specific initiatives?
1) Slow and super slow steaming
2) Investment in fuel-efficient technology (waste heat recovery, properly, hull and trim optimization anti-fouling technologies).
This shows our strong commitment to sustainability and the environment. We are also a signatory to the UN global compact on sustainability upholding human rights, labor rights, anti-corruption and environment.
Member of Clean Cargo Working Group (CCWG) - business to business forum with goal to promote more sustainable product transportation. Maersk Line publishes its CO2 performance through CCWG enabling customers to benchmark and select carriers on the basis of its environmental performance.
Our CO2 data is externally verified by Lloyd's list and available to customers on per container, trade or fleet basis.
What steps Maersk has taken to ensure sustainable approach in the maritime sector?
Bringing in absolute reliability, energy-efficient shipping, and enabling global trade are at the heart of our sustainability vision. Daily Maersk, EEE class ships, WAFMAX & SAMAX ships, slow steaming and super slow steaming are some of the innovative ideas Maersk Line has introduced into the world of shipping.
Acting responsibly for the long term is core to our sustainability initiatives.
Has Maersk started developing innovative business models that encourage long-term investment, taking into account social and environmental obligations?
Yes, as mentioned earlier, Daily Maersk, EEE, WAFMAX, SAMAX ships are initiatives taking into account our sustainability and social obligations.
Two key long-term initiatives are:
Technical (investments in EEE) : The new mega ships that we have on order is called the EEE category, which stand for Economies of scale, Energy efficient and Environment friendly, and signify our long-term investment. These vessels will reduce CO2 emission by 50 percent per container and be the first vessel that has a 'cradle to cradle passport' (a cradle to cradle passport is the most comprehensive material documentation system in shipping and helps us reduced resource use, pollution and waste by ensuring valuable shipping materials can be re-used or recycled).
Significant investments have gone into the making of these mega ships, which will be the biggest in the world in terms of capacity and environmental impact when it comes out.
Operational (Slow steaming and fuel/CO2 savings): ML pioneered slow steaming and adopted these as network strategy in 2010. This has resulted in significant decreases in fuel consumption and CO2 emission across the industry.
We estimate that slow steaming has resulted in 7 percent decrease in fuel consumption and CO2 emissions.
How does Maersk contribute toward the government's ongoing Saudization plan?
We feel strongly that Saudization is our responsibility and we are committed to it. Maersk has regular on-the-job as well as lecture-based and tutorial training(s) that are integral part of employee value proposition and personal development. It is our people that make the difference and we believe in focus, teamwork and synergies, which are essential elements of our employee strength. The A.P. Moller group has been positioned high on the Saudization scale by the government, and this is another illustration of high focus at developing local talent to take up the leadership role of tomorrow and contribute positively toward the development of Saudi Arabia. We have a global shipping education program called MLGP and we are committed to develop local talent from Saudi Arabia.
What is your opinion inflation in this part of the world, and how does it affect the operations of shipping companies?
I can only talk in general as to how inflation affects shipping from a global perspective. The hard truth is that we have seen prices have increased globally in terms of terminal costs, depot costs, local transportation costs, etc., however ocean freight rates have not increased to that extent but rather remained flat. This obviously means that the revenue has not been keeping pace with the cost and hence it becomes unprofitable to continue doing business at the existing freight rates and this partly explains the state of the shipping industry today and applies globally.
Have the rising oil prices affect the shipping movement in the recent months and what are your expectations for the coming few years?
Oil or bunker prices are a significant cost element in ocean transport, that is it amounts to approximately 45 percent of the overall operations cost. So fluctuations in the oil prices do impact the results significantly. We are unable to make any predictions, however we can only state the importance of recovering costs as the industry is clearly struggling to sustain investments (services) currently due primarily to poor financial results.
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