By Brian Dunnimage

There are few signs the global shipping industry will be turning around anytime soon, but that doesn’t mean all regions are suffering equally. In fact, one bright spot is Canada, according to MSC Canada which is looking to continue expanding its product both here and throughout North America by concentrating on where the cargo is, which dictates where services should increase.

Like any other business, the shipping industry goes through cycles, usually every seven years, noted Sokat Shaikh, President, MSC Canada. “We had done a restructuring in Canada approximately 71⁄2 years ago when I took over, to ensure we had the right structure for the amount of services we had at that time, and the import and export business we were doing. Since then, a lot has changed. We’ve added three services on the West Coast (including Prince Rupert), we’ve added a service in Saint John and an extra service in Montreal. You go back seven years, we had three vessel calls a week, mainly Montreal. Now we have eight calls a week and you can imagine the intricacy and administration tied to that. You can also understand that the commercial presence and footprint of our staff has changed as well. All of these things have to be accommodated through day to day administration. And if we don’t evolve and don’t plan for the future with the right structure, we’re essentially going to be a house of cards that will basically just collapse.”

Prince Rupert’s new service, inaugurated on October 1, 2015, is a joint Maersk-MSC initiative through its 2M alliance and an extension of MSC’s existing U.S. West Coast operations called the New Orient. The Maersk service is called the TP8. The vessels have capacities of between 8,000 and 10,000 TEUs.

MSC’s restructuring was tied to a 10-year plan in Canada to grow in each port, and the growth and impact MSC has had in each region has been noticed by many levels of government and by many commercially based entities, said Mr. Shaikh. The restructuring has increased MSC’ resources in Canada with the addition of new employees, and the company is looking to hire more employees. It has also increased its executive team from six to eight.

Mr. Shaikh was asked to give an update on the $42 million expansion of Termont’s Montreal Viau Terminal that will add a total of 600,000 TEUs of new capacity over two phases. MSC and Logistec Corporation are partners in the new terminal. “The progression of the terminal is going smoothly. Our biggest challenge is getting the construction and equipment in place as soon as possible. The cranes that will be discharging and loading the ships are going to arrive towards the latter part of this year and I think that will have a huge impact in the operations there with regards to productivity of labour, ease of operations and the berthing time of our vessels.

“The expansion includes two post-Panamax cranes. Today we have two mobile cranes which are still very expensive pieces of equipment. However, the labour at the port is not specialized on those cranes to discharge and load containers and we’ve had our productivity challenges. Regardless of those challenges which have a cost on the vessel and the operations itself, it’s a cost we are bearing as a company and it’s a display of our commitment to the market and a commitment to our customers.”

With some U.S. West Coast ports, particularly Los Angeles, we are experiencing congestion, resulting in shippers imposing surcharges to offset loading and unloading delays, and it has been suggested that Vancouver and Prince Rupert could attract new business. But so far, MSC hasn’t noticed any uptick in activity in those two ports.

“Our coverage on the West Coast is quite extensive, from Long Beach to Seattle to Vancouver and now Prince Rupert. MSC also concentrates strongly on transshipment hubs and these hubs allow us to route cargo that conventionally is routed via the West Coast to inland points in the U. S. We can transship it in Balboa (Panama), Caucedo (Dominican Republic), or Freeport (Bahamas) and these three transshipment points on the Pacific side and the Caribbean side allow us to easily move cargo into the Gulf regions and East Coast regions to eventually move to inland points like Chicago or Detroit or Milwaukee. So we’re obviously strong on the West Coast, but at the same time, should there be congestion, we have the ability to react quickly to handle it.”

Asked to comment on the outlook for 2016, Mr. Shaikh took a deep breath before answering. “It’s important to mention we’re a small piece of the puzzle and we have to follow the economic state of any region and it varies from one region to the next. MSC’s position on the global cargo movement is not super positive from the standpoint of revenue, which is in a deteriorating state right now. One of the main reasons is overcapacity with freight levels being almost unrealistic today. To weather the storm, MSC is taking cost-cutting measures, reviewing its planned investments and existing asset base. We need to react and adjust as we move through that timeline.” But, as noted earlier, there are opportunities on a regional basis and Canada happens to be one of those areas. That growth can come in two forms, one being economic growth of a region and the other through increased market share. That doesn’t necessarily mean taking market share away from a competitor. It means cargo that currently goes through U.S. ports that should go through Canadian ports, such as cargo destined for Toronto coming in via a U.S. port should instead come through Montreal, argues Mr. Shaikh.

“We’re looking at market share to come back into Canada. In addition to that, there is bulk cargo that has been transitioning over the years into containers and that’s an increase in cargo if we can find synergies between the seller and the buyer. We see opportunities in all those areas and we’ve focused our services in regions where most carriers wouldn’t. I think we’re the only carrier that offers eight services a week, including five independent and dedicated services, in and out of Canada.”

While 2016 is not shaping up to be a stellar year, Mr. Shaikh pointed out that most Canadian Port Authorities reported volume growth in 2015 over 2014, mostly on the bulk side but not so much in containers, he noted. “As far as MSC is concerned, we strive to be ahead of the curve when it comes to our volumes. And from the standpoint of Canada, MSC grew last year which was reflected in the three new services deployed last year. We will continue on that path of ensuring our service offerings are there and will continue to grow.

“When we created our fourth service to Montreal, Geneva (Head Office) had to find four new ships to dedicate to Canada. That’s a huge investment compared to adding a port call on an existing service like Prince Rupert which is what most carriers do when it comes to Canada. In most cases, Canada is not an independent destination.”

Turning to the issue of consolidation in the shipping industry, Mr. Shaikh said MSC doesn’t consider acquisitions an option since it has grown organically over the years and expects to continue down that path. “We have an owner who is a visionary at many levels and has always anticipated what to do in the next five, 10, 20 years and he’s been fairly accurate over the years. Those who don’t plan or prepare for the future and don’t have the proper business model have no choice but to look at economies of scale and consolidation.”

Although the P3 Alliance (MSC, CMA CGM and Maersk) was nixed by China last year as being too big, Mr. Shaikh feels the company’s current 2M alliance with Maersk is a better model than the P3 since the fewer people negotiate issues like service patterns, vessel allotments and trade lanes, the better. “I think MSC and Maersk on many levels are industry leaders in many regions of the world. I think our model has displayed over the years the strengths, when it comes to surviving whatever economic model comes our way, and I think that model will continue to be there moving forward, independently by the two companies.