Shipping Giants on a buying spree : Aim to offer total logistics

Shipping Giants on a buying spree :  Aim to offer total logistics

The pandemic and related challenges have benefitted the shipping industry. U.S Government support especially payments/cheques to U.S. households, fuelled a consumer spending spree. Freight rates have soared. In September 2021, a container from China to New York cost $22,000, eight times its 2019 price. That has boosted shipping firms’ bottom lines. Market leader Maersk’s EBITDA will nearly treble in 2021 to over $23 billion. The firm, which the market valued at $59 billion in mid-December, is likely to be carrying over $17 billion of net cash in 2022.

A Smart Move  

The normal response for CEOs like Maersk’s Soren Skou would be to buy ever bigger ships. Yet March’s blockage of the Suez Canal shows the dangers of excessive bulk. And the arrival of lots of new vessels in 3 or 4 years may create an excess supply of container space, sending freight prices downwards and also the shipping company margins.

A smarter move may be to invest in getting containers seamlessly from port to customer. Danish shipping and freight specialist DSV bought the logistics unit of Kuwait’s Agility Public Warehousing in April for $4.1 billion for just such a reason. France’s CMA CGM and Maersk both pulled similar moves in December. At $51 billion, DSV is too big even for Maersk. Switzerland’s Kuehne und Nagel, at $34 billion, would also be a challenge. However, its shares shed 25% in September and October as freight rates eased. If those trends continue, the company could come into play in 2022. U.S. land-transport specialist CH Robinson Worldwide, now worth $13 billion, would be another option.

Bringing sea and land services under one roof would allow for cost savings. It would also make it easier for operators to plot a course through future supply-chain bottlenecks and charge a premium for speedier delivery. Danish wind turbine giant Vestas Wind Systems, which has struggled to get parts throughout 2021, signed just such a deal with Maersk in November.  

 

Maersk is on a buying spree

Maersk owns more container ships and containers than anyone on earth, but it would be a mistake to think of the company as just a cargo shipping line. It’s also an airline, a trucking company, a port terminal operator, and a freight forwarder. Maersk has been steadily purchasing a piece of virtually every stage of the global supply chain as part of its ambition to become a one-stop shop for logistics.

Maersk struck a deal that offers a glimpse at the future of its business—and the future of global shipping. Starting next year, Maersk will effectively run the logistics operations of Unilever, one of the world’s largest consumer goods companies. Maersk announced in a press release that it “will be providing operational management of international ocean and air transport” for Unilever from 2022 to 2026.

International Control Tower Solution  

Come 2o22, Maersk will develop and help run a piece of in-house software, dubbed the “International Control Tower Solution,” to manage Unilever’s supply chains. “It’s a strong indicator that Maersk’s expertise extends well beyond sailing ships,” said Eytan Buchman, CMO at the cargo booking platform Freightos, who has written about Maersk’s acquisitions and expansion. “Combined with their other assets and what they’ve been building towards, it’s not a stretch to assume that this is another rung in the ladder towards full end-to-end global supply chain ownership.”

 Other developments in context

A.P. Moller-Maersk and wind turbine maker Vestas Wind Systems said on Nov. 10 that they had signed a long-term strategic partnership, including door-to-door transport from Vestas’s suppliers to its factories.

French shipping group CMA CGM said on Dec. 8 that it had agreed to pay $3 billion for the logistics arm of privately owned U.S. services firm Ingram Micro’s Commerce  & Lifecycle Services.

Maersk’s well-publicised acquisition of Senator, two 777Fs and leases on three 767-300Fs for its Star Air subsidiary, as well as its move into forwarding, could well disrupt the market. Then, of course, there is CMA CGM’s decision to set up its own airline, having acquired four A350Fs, two 777Fs and four A330Fs. As owner of Ceva Logistics, like Maersk, the line is looking to become a one-stop shop.