By Brian Dunn
When asked to describe his company’s uniqueness, Mediterranean Shipping Company (Canada) President Sokat Shaikh refers to a company ad headed, “Standing Out in a Crowd,” with copy that reads, “Built on a culture of exceeding our customers’ expectations, we stand behind space and equipment availability for your cargo. This mindset has led us to expand our Canadian service offering coast to coast in the past five years, now including the ports of Vancouver, Montreal and Saint John.”
“MSC has a unique culture. We’re a standalone office and the management structure is far less rigid than industry standards, which gives us the flexibility to adapt to the local environment,” said Mr. Shaikh. “This is reflected in the level of service we can offer our customers.”
Unlike a lot of its competitors, none of its business is outsourced to India or other less expensive countries, he pointed out. And sales and logistics are focused on the customer, which is why new hires have to be customer-focused.
“We can mould the product for our customers, which are our bread and butter.”
Like CMA CGM, one of three partners in the P3 shipping Alliance network (along with Maersk), MSC was “shocked” when the alliance was nixed by the Chinese government, especially after it had received the thumbs up from the U.S. and European Union. “It was more complex than the standard slot agreement since it was going to be run by a separate company. The primary focus was operational cost savings. Even with 2.1 million combined TEUs in capacity, it still left us with 1.5 million TEUs outside the P3 alliance.”
Overall, MSC is doing well and growing on the volume side, but the revenue side is “not great. There’s a lot of competition from the U.S. and we’ve still not recovered from the ’08 recession. We have to continue to focus on our costs.”
But there are a lot of long-term opportunities in its Canadian operations and there has been volume growth in all Canadian ports, said Mr. Shaikh. The global shipping industry is expected to grow between 2-6 per cent this year and Canada is not far behind those figures, he added.
“You factor in Canadian government initiatives such as reducing levies and the EU free trade agreement and it will have a positive impact for shipping. The government is allowing our industry to grow. We have substantial capacity in Canada. If a customer wants to increase capacity by 20 per cent, it’s just a matter of putting it together.”
When MSC began its bi-weekly service out of Saint John in April 2012, it conveyed the message a big company was going to where the cargo is, a risk a lot of shipping companies wouldn’t take, said Mr. Shaikh. The service has since been increased to a weekly operation.
“Customers in New Brunswick welcomed us and saw the value of driving cargo a few kilometres to load on a ship. Before we arrived, they had to go elsewhere. Businesses in New Brunswick are very mobilized and motivated to ensure their products and services are sought after by international markets and it doesn’t impact our business at other Canadian ports. Our biggest challenge in Saint John is to build the import trade.”
Last September, Hapag-Lloyd announced it was offering a new weekly feeder service out of Saint John via Tropical Shipping, but it’s not the same as putting vessels in port, noted Mr. Shaikh.
“The industry is moving towards economies of scale. Consolidation will continue as the escalating costs of operating assets by shipping lines can’t be ignored. We have to keep sharpening our pencils.”
As examples, Hapag-Lloyd and Compañía Sud Americana de Vapores (CSAV) signed a binding contract in April on merging CSAV’s entire container business with Hapag-Lloyd, subject to the necessary approvals. And in July, Hamburg Süd signed a preliminary agreement to acquire the container operations of the Valparaiso, Chile-based Compañía Chilena de Navegación Interoceánica, or CCNI, effective Dec. 31, 2014.
The recent ban of food imports by Russia over the Ukraine conflict could cost Canadian exporters about $600 million a year, with pork and shrimp accounting for the largest chunk of that figure. While MSC ships pork through the Port of Montreal, Mr. Shaikh isn’t too concerned how it might impact his business.
“Our network is different from most carriers. We can shift capacity easily with 16 services on any given vessel. Many carriers are single nation or one specific lane carriers. They can’t diversify as quickly as we can. Many of our customers realize that we can ship from Montreal to Freeport to connect to Argentina. And all three of my services in Montreal take containers to South America. We can also truck to New York to ship to South Africa.”
As for the pork out of Montreal, traders realize they can sell that same pork to China or other regions and pick up new customers, noted Mr. Shaikh.
MSC is looking to the future with optimism as indicated by its order book for newbuilds. With its 13.6 per cent share of the global shipping market, according to Alphaliner, it currently is ranked second behind world leader APM-Maersk with 15 per cent. But with orders for 42 new vessels compared to 12 for APM-Maersk, the two leaders could soon switch places.