Challenges ahead for shipping

Gerard Morrison, Maersk Line Oceania
Gerard Morrison.

The year started strongly for the red meat sector’s largest shipping line, but there are many challenges ahead. MeatExportNZ caught up with Gerard Morrison, managing director of Maersk Line Oceania.

Morrison, who heads up the Oceania sector of the containerised division of the global shipping conglomerate Maersk Group, says business has been going well, but is challenging going, he admits, “given a few headwinds, including higher fuel costs and lower freight rates.”

The shipping line’s business with the red meat sector was coming to the end of the peak season, at the time of writing at the end of May.

“It started very, very strongly, especially for meat,” reports Morrison, who declined to put a figure on the number of containers leaving the country, for commercial reasons. However, the flow of export meat products leaving meat processing plants still seemed to be going very strongly, he said, and Maersk Line has been able to meet the demand to get the products across the water to customers around the globe.

With employees in 325 offices across 125 countries and a fleet of more than 700 vessels along with 1.9 million containers, Maersk Line has the global reach and resources to accommodate customers’ broad transportation needs, said Morrison.

Its parent company A.P. Moller – Maersk, however, has faced some challenging global results this year. Annual results released in May showed revenue growth of 30 percent to US$9.3 billion, 10 percent excluding Hamburg-Sud, with growth in all business segments and a strategic transformation under way. The Group reiterated expectations that its underlying profit in 2018 will be above 2017 (US$356 million), but noted increased uncertainties due to geopolitical risks, trade tensions and other factors impacting freight rates, bunker prices and rates of exchange.

“These results were not as good as needed, which makes it more important for us in the container division to work even more closely with our customers in improving the service,” says Morrison.

“Over the last two years, freight rates have declined by 20 percent, as costs for other items such as fuel have increased,” he noted, adding the company is working hard at reducing costs and improving efficiencies with its customers.

The company’s fleet of 8,500 smaller 20 foot refrigerated containers which started to be introduced in 2015 (see FoodNZ December 2015/January 2016) have been received really well by New Zealand food businesses, which are using the majority of them to get smaller consignments of export produce to markets around the world, said Morrison.

“We had a fantastic response to them as they suit New Zealand’s transport and infrastructure conditions.”

Responding to the proposal from New Zealand First to move Auckland Port to Tauranga, Morrison said Maersk already does a lot of work with the Port of Tauranga.

“The conversation has to be had, but moving the port is only part of it,” he believes. “The important thing how we connect to Auckland and the rest of the infrastructure. We hope the conversation will spread to those connections.”

Smart assets big priority

The development of smart assets and digital supply chain integration is a big priority in the future vision for Maersk Line Oceania, said Morrison.

“We want to make life easier for our customers and more efficient and also to create end-to-end-solutions,” he said, admitting it is a difficult task, but one that the company needs to work on.

In late 2017, Maersk Line launched Remote Container Management (RCM) which involved equipping its fleet of over 260,000 refrigerated ‘reefer’ containers with simple M2M technology – a modem, GPS, wireless SIM card and satellite link.

“Deployed on a global scale, RCM is changing the concept of supply chain visibility and the costs and opportunities associated with providing it,” said Morrison.

In New Zealand, RCM technology is now actively used by 25 export companies, including red meat exporters, which are building RCM data into their own ‘internal’ systems.

“With full transparency of the complete supply chain, shippers can ensure that their cargo is being treated with the highest care at all stages on the container’s journey and, with more reliable data available, they can work more strategically on developing products and optimise processes along the entire supply chain,” he explained.

The use of “mind-boggling” blockchain technology is also set to drive ground-breaking digital transformation to the the paperwork and processes vital to global trade, believes Morrison.

“Following an extended period of research and collaboration, Maersk and IBM are developing an end-to-end global digital trading network based on block-chain technology. The solution has been called Global Trade Digitalisation (GTD) – an open industry platform that will move all administrative processes and transactions associated with a container shipment to the internet,” said Morrison.

Driving to reduce GHG emissions

Like the rest of the red meat sector, international shipping is impacted by climate change and the drive is on to reduce greenhouse gas emissions. In April, the UN International Maritime Organisation (IMO) adopted an emissions reduction strategy to reduce emissions from international shipping by 50 percent by 2050, compared to 2008 levels, and to phase them out completely by the end of the century.

Maersk’s drive to reduce emissions started earlier than other shipping companies and for the past 10 years, the company has been working to a target of 60 percent reduction by 2020.  According to Morrison, having already reduced its emissions by 43 percent on the IMO’s 2007 base level, Maersk Line is still ahead of the curve to hit its own 60 percent reduction target.

This is very good news for the New Zealand red meat sector. The slowing of vessels – ‘slow steaming’ – to reduce emissions had created some problems for getting perishable chilled meat cargoes to markets in time and has required some innovative work on shelf-life extension and cold chain integrity. The technological improvements already made to Maersk vessels and systems mean that the captain’s hand is steady ahead at current speeds and even slower steaming will not be needed.

“It doesn’t mean that we have hit perfect point, but we are getting there,” said Morrison.

Biosecurity rules

New Zealand has also become the first country in the world to roll out nationwide biofouling rules to stop dirty vessels contaminating its waters. The new rules, announced by Minister of Biosecurity Damien O’Connor and which came into force in mid-May, mean operators must prove they’ve taken appropriate steps to ensure international vessels arrive with a clean hull.

Saluting the move, Morrison said he encourages the stronger regulation and that Maersk Line will take any steps necessary to comply with the biosecurity requirements.

News that Maersk Line had been awarded Best Shipping Company of the Year at the Global Logistics Excellence Awards in Mumbai, India, in March was also welcomed by Morrison.

“It’s fantastic us to be recognised in the awards, which are voted on by our customers.

“It’s a tough environment, with costs rising and freight rates being impacted by trade pressures and currency,” he said.

“It’s all about working with our partners, finding ways to be as efficient as we can and working harder and harder at our targets.”

Maersk Line Oceania is a major sponsor of the 2018 Red Meat Sector Conference, that will be held in Napier on Sunday 29 and Monday 30 July. To find out more see www.redmeatsector.co.nz.

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