Thursday , 27 July 2017
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Ron Widdows: Landside cooperation is “inevitable”

Landside collaboration offers the container transportation industry its “single biggest remaining opportunity to reduce inefficiency” according to Ron Widdows, the former chief executive of Singapore-based firm, Neptune Orient Lines (NOL).

In an interview with CM during the International Transport Forum Summit in Leipzig, he said that while alliances have helped carriers find economies of scale on the ocean, opportunities for cooperation on feeders, barges, intermodal and truck have largely been untapped.

Speaking in a personal capacity, the current chairman of the World Shipping Council, said: “Lines have either wrung out or are in the process of wringing out the fuel economy and the impact of larger ships on the ocean which has seen the single largest area of savings.”

“As the pressure builds and as the opportunities to find more savings within the rest of their operations become more difficult, it’s inevitable that they will look to take advantage of the fact that with some cooperation, difficult as it will be, they can drive their cost down further,” he added.

Widdows emphasised that a significant “mind-set shift” would be necessary to enable the kind of changes and would be required in operational cooperation in areas that carriers have historically managed independently.

Additionally, carriers will have to carefully evaluate and clarify regulatory issues, which vary across their networks that should be able to be properly addressed and still allow “operational” cooperation to be pursued, he said.

On the topic of vessel size, the industry veteran, said that he “would not be surprised” if some ships reached 24,000 teu in capacity, but pointed out that he hadn’t previously thought that ship sizes would get to where they have.

“There’s very few lines that are going to be able to get the greatest advantage out of the 18-20,000 teu ships,” he said, although noting that smaller carriers could still get closer to larger ones with competitive slot costs as a result of the aggregation of volumes they have achieved  through their alliances.

In Widdows’s opinion, oversupply would exist even without the recent flurry of mega-ship orders and rates are likely to be “under pressure” for a long time.

As for overall trade patterns, the former chairman of the Transpacific Stabilization Agreement, a discussion group of major container shipping lines offering Asia-US services, retains confidence in China’s long term prospects.

A sceptic of near-shoring’s ability to damage Chinese trade, he stated: “The transportation cost is so low and the efficiency is so high in terms of sourcing from China that it’s hard to see that dynamic of near shoring having a significant effect.”

Although China’s trade figures have slipped in recent months, including a 10.9% year-on-year drop in April, Widdows thinks that potential Asian rivals face a “gargantuan undertaking” and quite some time to compete with China on infrastructural capabilities despite offering lower labour costs.

In his opinion, it could take a decade or longer for some countries to overcome the challenges of developing efficient inland infrastructure as well as expanded port and manufacturing capacity, to rival what exist in China, citing India, and Vietnam as examples.