Dialogues

Weathering the Storm

Interview with Jeremy Masters, Regional Director (Asia Pacific), Peel Ports

It is easy to feel slightly despondent when looking at container shipping’s statistics. In 2015, the supply-side rose to a four-year high while the demand-side growth rate hit a three-year low. The lack of head haul volume growth on the Asia to Europe trading lane was particularly worrisome as it accelerated the heavy cascade of ships clogging up other parts of the network. Towards the end of 2015, idled container ship capacity reaching a high not seen since 2010 at over one million TEU (twenty-foot equivalent unit), as ships of all sizes were swiftly removed from over-supplied trade lanes.

“The low, even negative, growth in Europe is reflected in sluggish cargo volumes and declines in imports for some countries. Growth in global trade has also lagged behind global economic growth in 2015 for the third consecutive year. But the maritime industry remains a critical piece in global trade, so we must continuously improve ourselves and look for ways to boost the industry. Regardless of how bad the market can get, the shipping industry will not be obsolete, so it will just be a matter of weathering the storm,” says Mr Jeremy Masters, Regional Director (Asia Pacific), Peel Ports.

In this issue of Supply Chain Asia magazine, Mr Masters shares his thoughts on Europe’s first semi-automated CRMG container terminal, the influence of megaships, and the future of the shipping industry.

Peel Ports Group is UK’s second-largest port group in the UK. How does Asia Pacific fit in the company’s plans? What is Peel Ports’ strategy for the region?

The trade between the Far East and Europe is the biggest single trade in the world. Our estimates indicate that at least 700,000 TEUs per annum move into the north west of England, in very close proximity to Liverpool. Liverpool’s natural hinterland of the Northern UK and Ireland is far bigger than that. Peel Ports aims to participate in that business, and our strategy is to build superior infrastructure to service that business, and then lay out the operational and cost benefits of using the port clearly to our clients.

Peel Ports’ new Liverpool2 terminal, scheduled for completion later this year, will have a total capacity of one million TEU, and will be able to accommodate the majority of the largest container ships in the global fleet. Traditionally, the bigger ships are the ones that ply trade routes between Europe and the Asia Pacific region.

The port’s central location makes it a global gateway for carriers from many parts of the world such as the Asia Pacific. With 70 per cent of the distribution warehouses in Britain nearer to Liverpool than to ports on the south-eastern coast (which service the bulk of Asian carriers), carriers could enjoy considerable savings in transport costs using Liverpool2.

Liverpool2 will be Europe’s first semi-automated cantilever rail-mounted gantry cranes (CRMGs) container terminal. Can you share with us more on this? How will it affect shipping to Asia Pacific?

Liverpool2’s eight ship-to-shore (STS) megamax quay cranes and 22 CRMGs are able to operate in wind speeds of up to 55 miles per hour. They are part of the £300m investment programme by Peel Ports to expand and develop the existing infrastructure and facilities for the Port of Liverpool, and create one of the UK’s most modern terminals – a state-of-the-art freight gateway at the heart of country.

Peel Ports has also invested £20m in its AutoGates system, which uses state-of- the-art identification technologies to manage gate operations, producing quicker, more predictable and reliable throughput times for the haulage community and their customers. Together, this combination of infrastructure and technology will reduce the time taken to transfer containers from port to road or rail, helping the Port of Liverpool to achieve targets of 65 per cent of haulage turned round in 30 minutes and 95 per cent of haulage turned in 60 minutes.

To shippers and customers, this means overall shorter down times for ships idling at port, and lowering costs for them at the end of the supply chain in Asia Pacific and beyond. Asian exporters and importers want to get their goods to market quickly and reliably. By bringing goods closer to their final destination by ocean, our state-of- the-art facilities in Liverpool provide a unique opportunity to move goods efficiently, reduce inland transportation cost and avoid the delays caused by dragging containers across long distances from southern ports on congested UK rail and road infrastructure.

Why does the industry continue to invest in port infrastructure when trade growth is sluggish?

Maritime trade remains essential to the global economy. Nearly 90 per cent of international trade is carried by sea, according to the International Maritime Organization.

There is a constant need to upgrade and develop port infrastructure to maintain economic growth, productivity and competitiveness. Particularly in Asia, where economies continue to grow to the extent where existing port infrastructure require heavy investments to accommodate further expansion. Ports need to ensure they are ‘future proofing’ their infrastructure and operations to align to the changes in market dynamics.

This does not just include vessel size and automation. Terminal operators need to raise their game to show that they can provide a value-added service that helps their customers to work more efficiently, operate smarter and offer a more sustainable route to market.

This port-centric approach could mean working with customers to offer logistics and warehousing solutions, which use existing facilities on site at or near the port, allowing goods to be processed and dispatched to distributors more quickly. Alternatively, it might be that facilities, including rail or inland waterway links from port to logistics hubs offer a cost saving that cannot be obtained elsewhere.

In your opinion, will megaships really guarantee a success for the industry?

Megaships are a key component of modern container shipping and are here to stay. It is, however, still questionable whether its economies of scale will justify the increasing size of ships. Megaships will not guarantee a profitable industry but they are part of the solution for an efficient industry that facilitates world trade by moving goods over long distances at remarkably low costs.

Megaships help to reduce costs per container costs, by using less fuel per container, expelling fewer emissions, and improving the overall cost structure. This translates to more efficiency and environmental benefits for shippers.

Yet, there are several supply chain costs and risks related to megaships. There are adaptations needed to infrastructure and equipment: the ships are longer, wider and deeper which has consequences for cranes, quays and access channels. Megaships also stay on average 20 per cent longer in ports and this requires massive efforts to accommodate these longer-stays. Ports need to be highly efficient to manage these peaks in activity. They place a demand on port-centric logistics and hinterland transport links. These need to perform to a high standard to avoid bottlenecks and congestion.

We are halfway through 2016. In your opinion, how would the maritime industry perform by the end of the year?

In recent weeks, we have seen a flurry of merger/takeover moves amongst major carriers as well a rationalisation of consortiums that reduces the number of major worldwide consortiums from four to three.

Over time, this concentration will mean that carriers will start to get a better grip on the supply of container capacity, which should lead to a more consistent and remunerative profile for carriers which for many years have not been earning an adequate return on capital. 2016 will be a very difficult year for many carriers, but assuming no major upsets in world trade, the industry should see a more positive outlook as the impact of consolidation kick in over the next two years.

Mindful of these challenges, Peel Ports is highly focused on providing a value-added service that really helps our customers’ work more efficiently, operate smarter and offer a more sustainable route to market. For example, with our new deep-water container terminal Liverpool2, we enable shippers to get closer to the heart of the UK and deliver ocean freight to their end destinations, cutting costs, congestion and carbon emissions.

Shippers and shipping lines are increasingly buying-in to this proposition. In fact, in the first quarter of 2016, we announced three new or expanded services to Liverpool, namely Maersk Group’s intra-European arm Seago, MSC-owned WEC Lines and X-press. This reflects the growing recognition among carriers of the benefits of shipping closer to market via the northwest, as cargo owners continue to look for ways to improve efficiency in their supply chain.

In your 30 years of experience, is the maritime industry attracting the right talent it needs? How should the industry attract today’s generation to join its ranks?

Asia will remain a key growth engine for the world’s maritime industry in the coming years. However, talent shortage is a key challenge for the industry, even in Singapore.

In Asia, the industry is looking to both public and private sectors to develop initiatives to attract, train and retain talent. Singapore, for example, has established scholarship programmes, internship initiatives and university courses to encourage young talent to join the industry. Earlier this year, the Singapore government launched a new S$1.2m Tripartite Engineering Training Award (TETA) Programme, aiming to address the shortage of marine engineers in the industry and gather feedback from shipping companies.

In your opinion, will the shipping industry continue to prevail in 2050? Is there any possibility of the industry being obsolete in the future?

Far from becoming obsolete, technological innovation continues to help ports and ships stay relevant, by increasing their efficiency and environmental sustainability. The constant drive for better propeller performance and high-tech coatings, as well as friction-reducing air cushions is helping to reduce carbon and sulphur emissions. All of these advanced innovations are pushing the maritime industry towards a greener and more environmentally friendly future.

300 years ago, Liverpool helped to usher in a new era of international shipping and trade, with the creation of the first commercial wet dock, an innovation that saw the city become one of the world’s leading ports.

To remain at the forefront of the shipping industry, the Port of Liverpool will see an expansion in its capabilities through the opening of its new £300m container terminal, Liverpool2. The redevelopment will introduce leading-edge technology and infrastructure to keep the port fit for companies and their supply chain needs for decades to come.

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