CEO of Drewry Shipping Consultants says liner shipping companies’ trying to cut in on forwarding and logistics to improve their long-term profitability are sailing in the wrong direction.
Tim Power, CEO of London-based Drewry Shipping Consultants, believes liner shipping companies’ latest business models that are aimed at the forwarding and logistics sectors and designed to improve their long-term profitability are flawed.
In a key note presentation at Intermodal Asia 2019 in Shanghai, Power said: “There are lots of risks to these strategies, not least of which they conflict with these carriers’ existing customers which are the forwarders. Then there are issues with management time and resource. If you do not concentrate on the core liner business and its operations you will be found out. As history has shown this is an unforgiving business.”
He continued: “In my view, the key to profitability in liner shipping is its structure. There needs to be more consolidation. A five company oligopoly would be the answer and the rest of the lines are a waste of time.”
In his presentation, he highlighted that all of the main carriers, including Maersk Line, CMA CGM and China Cosco Shipping had developed business plans and spent heavily to forge a presence in the logistics sector. In contrast, Hapag-Lloyd has stuck with the core business and is focused on improving operations and yields.
“Hapag-Lloyd will, in my view, perform better,” concluded Power.