Maersk: Using Pies with Meat to Defense the Cold Stream

 

I was once very honored to take the position in Maersk HK branch in the period from 1996 to 1998, when HK is returning to the mainland. At that time not only in HK but also in the mainland I made many Chinese friends. Eivind Kolding, CEO of Maersk Line and of the Container Business, mentions China as an old friend who he met again after a long time and he has a very special feeling towards China.

But it seems that Eivind always meets his old friend at quite special times: In 1997, when Eivind takes the position in HK Maersk, Asia Economy Storm is beginning from Thailand and hit the shipping industries in HK and other places.

Now when Eivind comes to China to take the position as CEO of Maersk Line and of the Container Business, he encounters the global economic wind resulted from the American 2007 subprime lending crisis again and the Asia shipping market is heavily cold. But it seems that the steersman of the largest shipping company in the world already has the preparation.

 Not disagree and do not believe in the decline theory.

Our panic appears never stopped at the beginning of this year’s Chinese stock market bad condition. Maybe in twenty years ago, the economic inflation would has no impact upon Chinese economy, but now when the economy becomes one globally, Chinese economy will catch a cold once the America sneezes.

The mad news of the subprime comes once after another. Recently American news declares that the consumption tiredness and weakness aroused by the subprime lead to the broken wave of the retail industry of all American and the close of thousand chain shops. Under the background of the supply chain globalization, the tiredness and weakness of American consumption market naturally affect the export of “Chinese supply”.

Q1’s quantum of the export and import of the strong American exporter Zhejiang province is $4.53bln, falling 0.8% and this is the initial falling after the Asian Finance Storm in Jan, 1997 during the 11 years. And the quantum of the export is $3.87bln, falling 4.2%. Behind this statics is the gloomy of the shipping market from China to America.

And during Q1, our export quantum falls with an added speed to $305.9bln, increasing 21.4% and the falling percentage is 6.4%. Whether the subprime will lead the global shipping market to a low point? Eivind states with worry that the American economy will affect the development of the global economy and we could predict that the development of this year will be slower than the last year.

But when the reporter doubts the foreground of the shipping market Eivind show obvious optimism: I am not agree and do not believe that there is a fading future for the shipping market. I still insist the economy and trade are strong in the whole world, including China.

I think the fading idea occurs because the some people are considering this question: how to treat the demand and supply relationship for the shipping industry at present. We should notice that the demand is great and the trade volume is great too. But in face of this demand, the shippers have ordered many new shippers and now it is possible for a supply-over-demand situation to appear. But we do not need worry about this since it is a normal situation. People find a balance point to order more shippers at a good situation and order less shippers when situation becomes plane. Though more ships will appear but generally the supply will keep the balance with the demand in the global trade.

Pay attention to China and obtain a positive attitude towards Chinese market

The domino effect of the subprime has occurred in Europe and arouse many suffers. But it seems not so terrible in Chinese and Indian markets which latterly met the impact. The appearance of Eivind at this special occasion shows the great attention of Maersk towards its Asian shipping market.

We think the global trade volume will still increase and especially the quantum of the export and import in China will increase to double of the last year’s one. Although the global economy will slacken but the Chinese economy will still be strong. Eivind takes every word seriously and loudly.

“Let’s take a look at the Pacific shipping line at first. We expect there will be 2% increase on the export in the east of the world to American, especially from China. Comparing with the former increase of double-digit it falls. Because of the depreciation of the US dollars now the quantum of the export falls but we can be very happy to see that the percentage for the export from America to China increases. We believe the growth of the Chinese economy will continue and our business with China will continue.” Eivind mentions to the reporter.   

The positive attitude could be proved by another point of view. Now the Director of China People’s Bank Zhou Xiaochuan declares that the Chinese financial enterprises now are healthier than the ones at the Asian financial storm. Lesser losing will not effect their profit-gaining ability and the share price. At present, the negative effect of the subprime is smaller than what we have predicted. And the loss of some of the Chinese financial institutions is within the acceptable range. He also points that from the statics of the 2008’s Q1, the import from America and Europe to China keeps a fast and stable growth. Until now the subprime crisis has no obvious effect upon the Sino-America trade.

Maybe Eivind’s sense is right. Once the Sino-America trade keeps a stable growth the market of Sino-America is still expectable.

Using “pies with meat” to defense the market risk

The industry upgrade development may be the fundament to get through the difficulties of the shipping market at present. We can get some inspiration from the Asian finance storm in 1997.

While robbing the Asian economy, the Asian finance storm in 1997 reveals the problems hiding behind the glorious economy for some economy high developing Asian countries and triggers the reforms of some developing countries, such as ameliorating the macro-management etc.. The HK shipping industry has also suffered the most terrible impact from the finance storm and the part of logistics enterprises who obtain the info, network, intelligence and standards also become stronger during this competition so that the new world known shipping center has been explored.

It is a blessing or a bane is still a question for the shock brought by the subprime crisis. Maybe it could reveal some deeper questions in the economic development. In shipping market, China is developing into a super port & shipping country with high speed. But there is still distance for China to become a strong port & shipping country. Because of the harsh develop mode and under the circumstance that the competition becomes more and more incandesce, the marketing cake becomes the marketing thin pancake. Eivind points out to the reporter that though the export of the America is enlarging, it is still small comparing with the one in the Asia area. On this line it is still hard for us to make up our loss completely.

The influence brought by the subprime will definitely accelerate the transformation of the shipping & logistics market into an intensivism mode. Sustainable development In face of the shared shipping logistics cake, Maersk starts to add delicious “fresh meat” in. And the fresh meat is the “Green Environment Protection”.

Eivind tells the reporter that we paying attention on how to work together with our partner and customers to keep the close eye on the environment protection problem. Maybe this problem is not on their economic business industry agenda five years ago but now every person handle this kind of business pays great attention on this matter. We have made many efforts to make our newly built ships be less energy consuming, less let and environmental friendly. Our management authority and our customers always discuss how to achieve the greatest effect on the environment protection.

On promoting the green shipping industry Maersk has created the new carbon reduce and let consultant service named ”supply chain’s carbon control “ in Nov. 2007 in the global range to aid the customers make and carry the solving plans in reducing carbon reduce and let in the supply chain. Besides Maersk will control the use of the fuel and the lube to the lowest state, use low-sulfur material to reduce the exhaust emission, apply engine running smoothly policy, use high let technology of the engine nitrogen-oxide to reduce the co2’s amount to the lowest point, use non-lead dope, reduce the effect to the sea resulted from the ocean shipping, install all the safety protection fuel boxes in the newly-built vessel, reduce the risk of the fuel-leaking in the contingency to the lowest point, carry out the waste management plan on every vessel, explore the replaceable material for sustainable replacement to the bottom of the container ship and other actions as a whole series to reduce the effect to the environment to the lowest point.

At present the NPC and PCC of 2008 declare the establishment of the national environmental protection ministry. There is no doubt that the government has paid great attention to increase the sustainable development and the Maersk’s green logistics theory should be well advocated too. Maybe this is the crisis sense of the leading enterprise. The competition for the future market is not to do the best service but more in humanity and Sustainable development theory.