IHS FAIRPLAY

Danish Maritime Days 2016

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22 | October 2016 | Fairplay.IHS.com The difficulty with forecasting ↘ These are strange times for shipping. At one end of the spectrum, we report each dollar rise or fall in freight rate or charter hire while watching every snippet of news about container carrier alliances. At the other end, techno-wizards are busy fitting sensors all over the engines and tweaking software algorithms to allow vessels to navigate without human interaction, in a pre-defined area that has been 3D-mapped and geo-fenced. In fact, reality lies between these two extremes. In spite of everything, shipping remains cyclical – although the bestdigitaltechnologytodevelopindividualservices toitsmanycustomers.Themantrabecomes:wewill growasyougrow,andwhat'sinyourbestinterest isinourbestinterest.Thiswillmeantargeting thecustomerswhocanmakebetteruseofnew technology,whichinturnwillmeanbecoming ruthlessinidentifyingthosecustomersMaerskwants toplaywithandthoseitdoesn't. Bynarrowingitsareasofexpertiseandtargetingits capitalallocation,MaerskGroupisleadingtheretreat awayfromglobalisationandglobalisedsolutions.Other containerlineshavetriedtomatchitinitsglobal approach.MaerskLinehassufferedalot:profitfrom continuingoperationsin2015wasUSD1.3billionfrom USD2.3billionin2014.Competitorsstruggledeven more:CMACGMpostedUSD567million,OOCL USD284million,andHapag-LloydUSD124million, whileChinaShipping,Evergreen,'K'Line,YangMing andMOLpostedlosses–thelastoftheseaUSD1.5 billiondeficit,promptingMOLpresidentJunichiro Ikedatodemandstrongertiesanddeeperlong-term relationshipswithoverseaspartners. Theyearaheadpromisestoseemanymorecorporate restructuringsasshareholdersofbusinessesinthedry bulk,container,andenergysectorsalsoacknowledge theneedtotaketheinitiativeinadynamicworld. MaerskGrouphasbeenthefirsttoeffectchange. HanjinShippingleftitfartoolateandanalystsagree theSouthKoreanoperatorwon'tbethelasttofall,but asyetthereisnoconsensusastowhetherHanjinwas ↘ In all the coverage of the decision by AP Møller-MærskA/Stodivideitsportfoliointotransport andlogistics(T&L),andenergy,theobservationby AneMærskMc-KinneyUggla,chairmanofAPMøller Holdingstandsout.Shewarnedagainstbecoming "staticinadynamicworld". DoesSørenSkou'sannouncementacknowledgethe group(and,let'sadmitit,theshippingindustry)is becalmed,anddothechangesindirectionhehasset outshowanythingmoresignificantthanmanage- menttweaking?Readingthepressstatementagainit appearsthere'sagreatdealofrearrangingthedeck chairsgoingon. Intheolddays(2008–16),Skousays,thebusiness unitsoperated"atarm'slength"fromoneanother,so theT&Ldivisionwillbecomemuchmoreintegrated andcollaborative.Nodoubtothershippingbusiness leadersareyelling:wedothatalready!Meanwhile MaerskOilwillreduceitsglobalfootprint–or,touse thejargon,"focusitsportfolioinfewergeographies" –soastodomorewiththelimitedresourcesavailable. Wehaveallhadtodothat. Throughout2017/18MærskGroupwill"find solutions",probablyoffloadingitsoilandoil-related businessestoenablethemainfocustobecomea containershipping,terminaloperations,supplychain management,andfreightforwardingbusiness. Nothingrevolutionarythereinitself,yetthere issignificance.It'sthis:Maersknowseesitcan'tbe everythingtoeveryone.Insteaditwillusethevery Maersk's gets in first strike shape of the cycle has become elongated, especially by the restructuring of China's economy and the low price of oil. With what might seem to be unreasonable haste, some shipbrokers have already written off the rest of 2016 and the whole of 2017 as weak, challenging, or exceedingly painful for the dry bulk, offshore, and container sectors. For reasons they don't specify, brokers confidently expect a dry market recovery in 2018 on the back of a strong upturn in oil prices. Even BP's group chief executive Bob Dudley believes there will be a rise in the oil price this year, but only to USD50/bbl; beyond that, BP's greatest minds cannot say. This is a cycle, but not one we recognise. The shipping industry is awash with forecasts. Most hold good for as long as it takes to read them, by which time any recommendations have been overtaken by events. This suggests there's no point taking decisions based on forecasts. Perhaps American statistician Nate Silver went to Shutterstock FAIRPLAY Industry insight

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