Executive Briefings

Is There a Return to Focus on Core Services by Ocean Carriers?

A mixture of financial necessity and commercial reality is further forcing ocean carriers to return to providing core services only. Shipping lines are still being squeezed out of providing home-grown integrated logistics services. This is evidenced by Maersk's recent news that it has entered into an agreement to sell the assets of its U.S. trucking subsidiary, Bridge Terminal Transport.

Is There a Return to Focus on Core Services by Ocean Carriers?

Although partly driven by financial necessity, the ocean carrier trend appears to recognize that one-stop shops are not the way forward; that expansion via vertical integration should be replaced by greater focus on the provision of core services.

This is implicit in Maersk's statement, which reads: "˜The Group's strategy is to build on its strong presence in shipping, energy and related activities. We have been pleased with the business levels, the profitability and the quality of management at BTT. It is, however, a provider of drayage services that does not fit in our long-term strategic focus [any longer]. The sale will allow the Group to reallocate resources to the strategic focus areas within shipping, energy and related activities.'

The industry trend is not new. For example, in June, Maersk announced the sale of its European railway company ERS Railways to Freightliner. In May, Zim Line sold its holdings in two companies that own container manufacturing factories in China. In April, MSC announced the sale of 35 percent of its ports division, Terminal Investments Limited, to Global Infrastructure Partners, and in January, CMA CGM declared the sale of 49 percent of its container terminal operating company, Terminal Link, to CMHI. Much earlier, in 2010, Maersk already sold its stake in the logistics company Trans-Siberian Express Service to InterRail, whilst others started reducing their involvement in third-party logistics services even before then.

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Although partly driven by financial necessity, the ocean carrier trend appears to recognize that one-stop shops are not the way forward; that expansion via vertical integration should be replaced by greater focus on the provision of core services.

This is implicit in Maersk's statement, which reads: "˜The Group's strategy is to build on its strong presence in shipping, energy and related activities. We have been pleased with the business levels, the profitability and the quality of management at BTT. It is, however, a provider of drayage services that does not fit in our long-term strategic focus [any longer]. The sale will allow the Group to reallocate resources to the strategic focus areas within shipping, energy and related activities.'

The industry trend is not new. For example, in June, Maersk announced the sale of its European railway company ERS Railways to Freightliner. In May, Zim Line sold its holdings in two companies that own container manufacturing factories in China. In April, MSC announced the sale of 35 percent of its ports division, Terminal Investments Limited, to Global Infrastructure Partners, and in January, CMA CGM declared the sale of 49 percent of its container terminal operating company, Terminal Link, to CMHI. Much earlier, in 2010, Maersk already sold its stake in the logistics company Trans-Siberian Express Service to InterRail, whilst others started reducing their involvement in third-party logistics services even before then.

Read Full Article

Is There a Return to Focus on Core Services by Ocean Carriers?