The financial crisis, the shipping industry emergency "downs

Fluctuations in the shipping industry is highly cyclical industry, so a lot of shipping enterprises in the development process have unanimously taken the expansion to increase the diversification of risks and returns of cyclical risks of confrontation, there are companies seek economies of scale, the use of marginal cost-effectiveness in order to gain the maximum benefit . In the face of the raging financial crisis and the impact of long-term, the shipping industry also have to start emergency "downsizing" to ensure the safe operation of main shipping.

Peel shipbuilding business

August, belonging to 丹麦奥德塞 Maersk Group announced the completion of shipbuilding contracts have been signed after the termination of shipbuilding business orders. Odyssey Shipbuilding Group has signed a contract orders (five bulk carriers, seven, and three light transport ro-ro vessels) will be delayed until August 2010, November 2011, delivered in February 2012.

Odyssey Shipbuilding Group Industrial Services business areas related to parking areas and cranes (including the gantry crane) operators, steel storage and handling, heavy equipment, internal transport, pipelines and steel components, production as well as ocean-going ships of the lease. With the completion of shipbuilding orders, Odyssey Shipbuilding Group Industrial Services out of spare production capacity. As the Odyssey Shipbuilding Industrial Services Group, a strategic business areas will no longer be necessary for the Maersk can therefore be sold as a separate business. As the shipbuilding business, termination, Odyssey Shipbuilding Group is no longer required full operating Lithuania Shipyard, Baltic Shipyard increases, Maersk has therefore decided to sell them. At the same time, the design company located in Lithuania, UAB Baltic Engineering Center will also be sold.

Maersk shipbuilding business is the main industry in the cost of hedging the risk of an important diversification strategy, but the ship heavy assets of its own manufacturing industry, high-volatility characteristics and the rise of the Asian shipbuilding center Maersk much pressure on the shipbuilding business, risk-adjusted returns, in fact, Maersk's shipbuilding business has been a loss for many years.

Maersk acquired in 2005 the world's second-largest shipping company P & O Nedlloyd, M & A total of 15 billion Danmaimake, all in cash. M & A recognized a loss of the year (restructuring costs) as Danmaimake 2.26 billion the following year there is still a loss of 1.8 billion Danmaimake been identified. High M & A spending to make the Group's net debt capital from zero in 2004 rose to the level in 2001, reaching more than 40% and thus the overall allocation of financial resources the Group has put forward higher requirements. Maersk shares after the fact, M & A has performed worse than the Danish market's overall performance. Although the shipbuilding business, like with the oil business to the cost of hedging the risk of the primary industry, but as a business portfolio as part of its risk-hedging has been a low rate of return, or even negative rate of return on the role of the proceeds offset by dilution, which is a listed company They are unbearable. Stripping has become the inevitable trend, while the current financial crisis will undoubtedly accelerated the process.


Be a key risk-reward

Prior to 2002, in addition to oil and gas exploration, the Maersk has also entered several other business areas, including shipbuilding, rubber, plastics, medical equipment, air transport, IT, retail, machinery and equipment industries, with a view to further spread the risks. Since 2002, Maersk adjust its strategy and began stripping the sale of oil, retail than other businesses. To 2007, Maersk Sealand, the only shipping, oil, retail and shipbuilding businesses, this year, a shipbuilding business has also been stripped.

Well-known American management guru Drucker once said, a higher degree of business diversification, coordination of activities and may result in delays in decision-making more. If diversity can be spread risk, then why should Maersk divest these businesses? The reason is that these services risk-reward ratio is too low. Shipping companies can indeed expand through diversification to reduce cyclical fluctuations, but the expansion of the path needs to be extra careful. Although the expansion, including those operating on the object can not relevant, but the risk and high return business, such as retail, but can not tolerate a high degree of operational-related, but the risk low return business, such as shipbuilding.

The spread of financial crisis led many shipping companies to expand the diversification of risk. Coincidentally, the end of February, from Hanjin Shipping shares held by Bacheng the end of the victory of the shipping business, a formal liquidation. A spokesman for Hanjin Shipping, said the Asia-Europe freight line is to determine the low end of the main reason for the victory of shipping. Victory Shipping was established in 1987, the fleet traveling Asia and Europe the main line, performance long-term loss in 2007 was profitable for the first time. The company completed last year, after the reorganization, said they would continue to expand its route network, but the main business was freight routes almost dropped to zero, eventually led to the company's failure to continue to operate.

Seek appropriate scale

Vigorously diversification does not necessarily weaken the operational risks, a comprehensive focus on attack than attack to its core businesses of bigger, well, stronger. The basis of consolidation, economies of scale to become effective, the Group's enterprises in the fierce competition at home and abroad is possible to win. Economies of scale are not "large" economy, the more the economy is neither larger nor smaller size the more the economy, but a moderate scale, effective size and thus have the economies of scale benefits. The members of enterprise groups is not a simple sum of factors of production, but within the group through the complementary advantages, sharing research and information resources, efficient use of all assets of the formation of the body of specialization and cooperation within the group.

Maersk Logistics and the Department of German high-Maersk's cargo were independently operated corporate brand. Logistics in 2000 on the basis of a favorable acquisition of land and sea logistics set up after the Maersk Logistics, a number of acquisitions in the industry in 2005 in the acquisition of P & O Nedlloyd Logistics, the German high sea air transport services are incorporated together. 2007 will be a subsidiary of Maersk Logistics forwarding services include sea, air, ground service with the German high sea and air transport various businesses to form a new German brand of high freight. However, time has just been in the past two years, Maersk Logistics and Germany have again moved toward the high freight consolidation, but this time a reservation is a German high brand.

Turning to the operation of the reasons for the merger, Maersk Logistics and the Global CEO of JCDecaux Habinzhansen cargo, said a new single brand will allow customers to more simple and convenient with Maersk worldwide team. After the merger, JCDecaux will have tens of thousands of worldwide customers, ranging from the internationally renowned multinational companies, trade across the retail, apparel, electronics and chemical industry. Meanwhile, the import and export will also meet with many small and medium enterprises to maintain good relations of cooperation.

To avoid the trap of negative cash flow

The latest round of the shipping industry boom cycle lasted five years, shipping companies in this round of a super bull market has accumulated an unprecedented amount of operating cash flow. But the hundred years of financial crisis, people began to care about: if the future of extreme happens, business cash flow is negative, shipping companies can sustain how long? Can not wait until next spring?

"Cash is king" is not empty talk. Cash flow is like the blood in human body, the smooth flow of corporate cash flow or not, the relationship between the company's fate. In the current financial crisis, the shipping companies, the best option is to keep as much as possible in cash, to avoid the trap of negative cash flow, patiently waiting for the next shots.

Shipbuilding because of the need to pay a lot of money, and because of excess pressure on capacity on the market are still ringing in, so many shipping companies have chosen to cancel or delay orders for new ships. The China Ocean July 15 announcement that the China Ocean canceled and COSCO Shipyard Group Co., Ltd. has not yet entered into the construction of the 8 57000-ton bulk carrier contracts worth a total of 299 million U.S. dollars. COSCO China Ocean Shipping also delayed another 3 on the 57000-ton bulk carrier has signed an agreement delivery schedules. China COSCO said COSCO China Ocean Shipping will be returned for the 8 bulk orders for the purchase price has been paid, COSCO China Ocean Shipping will not be held responsibility for the delay in the ship.

Shipping companies are renting a considerable portion of the ship, therefore, was insufficient in the face of operating conditions, less is tantamount to charter a small loss of the lease after the expiration of the shipping companies have chosen not to renew. Compared with last year by the end of December, Orient Overseas at the end of June as the capacity has been reduced by 14%, currently has 80 vessels, a total of 351,000 TEU. The end of last year, the company a total of 89 ships and 373,000 TEU. Orient Overseas future will continue to adjust capacity according to market conditions, in the second half or will lease four ships returned goal is to be reduced by 20% of capacity throughout the year.

Shipping company's "downsizing" actions inevitably bring about layoffs. Maersk in the past 18 months has laid off 24% of the jobs has become all the world's largest shipping companies in a layoff.


June 5, Maersk announced to September 7, its supply chain management business brand Maersk Logistics and Freight Forwarding business brand will be combining high Germany, after the merger the new brand will use the name of high Germany, business will cover two brand existing supply chain management and freight forwarding in the field of work.

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