THE VALUE MAN THE KIM FEJFER INTERVIEW. APM T s ceo: We want to make a difference to our customers APL OUTLINES ITS PLANS, INCLUDING TRIANGULATION

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1 SEPTEMBER CARRIER UP CLOSE: APL AMERICA APL OUTLINES ITS PLANS, INCLUDING TRIANGULATION P44 TRADE ROUTE INTELLIGENCE N. AMERICA-MIDDLE EAST: HOPES ARE FLYING HIGH P46 SHIPPER UP CLOSE: COTTON US COTTON EXPORTS COME UNDER THE MICROSCOPE P51 MORE INSIGHT Bunker Update...16 Box World Briefing...28 Opportunities & Risk: Russia...60 Tech Difference: GT Nexus...63 APM T s ceo: We want to make a difference to our customers THE VALUE MAN THE KIM FEJFER INTERVIEW P38

2 THE VIEW FROM THE BRIDGE INSIGHT FROM THE C-SUITE/KIM FEJFER THE VALUE MAN 38 CONTAINERISATION INTERNATIONAL September 2012

3 September 2012 CAREER HIGHLIGHTS 2012: Chairman of DAMCO and Maersk Container Industry 2011: Executive board member of AP Moller- Maersk Group, Copenhagen, Denmark 2004: Chief executive officer APM Terminals, The Hague, Netherlands 2000: Senior vice president and chief financial officer of Maersk Inc, Madison, New Jersey, US 1998: Vice president of finance, real estate and IT of Maersk KK, Tokyo, Japan 1995: General manager of finance, human resources and IT of Maersk Indonesia Ltd, Jakarta, Indonesia 1992: Financial controller and business advisor of AP Moller-Maersk A/S, Copenhagen, Denmark Kim Fejfer, ceo of APM Terminals, explains to John Fossey that the key to being a successful operator of container-handling facilities is always delivering value to customers APM Terminals (APM T), which was spun out of Maersk Line in 2001 and now sits as a separate business unit and profit centre within the Copenhagen-based AP Moller-Maersk Group, has emerged as one of the leading global terminal operating companies in the world. In H1 12, the company handled 17.6 million TEU, about 45% of which was non-group (Maersk, Safmarine, Seago, MCC Transport) business, posted revenues of USD2.4 billion and a profit of USD395 million. These figures were up 8.6%. 8.1% and 30% on the corresponding period of This was no mean achievement given that many ocean carriers remained in the red during the period. Moreover, economic storm clouds were gathering, particularly over Europe, and once again denting the world s cargo growth prospects. But then again international terminal operators (ITO) have seemingly been sailing rough seas much better than their liner company counterparts, and APM T was not the only ITO to shine when interim results were posted this year (see Terminals still buck economic trend, p26). However, that does not mean that the company and sector does not face serious challenges. Indeed, Fejfer was the first to admit that current times were difficult and that some markets (notably Europe) and some business sectors (principally the ocean carriers) were under significant pressure. Our challenges come on three horizons; the short, medium and longterm, he said. Right now APM T is focused on keeping its costs low while delivering valued services to its customers [ocean carriers, importers and exporters]. But this is neither a long term or sustainable strategy. Medium-term, our challenge is to have the facilities in place to handle the increasingly large containerships coming into service and right across our portfolio as carriers cascade tonnage from east-west trades to emerging markets. I also see this period as being marked by significantly higher fuel prices with the result that bunkers will have an even bigger effect on carriers profit and loss accounts. As an ITO we have to help our customers deal with this and we can do two things: up the reliability of our services, and handle their cargo faster and more efficiently, and we will. According to Fejfer, the third challenge and a nice one to have in many respects is accommodating the extra traffic that will result from sustained growth in the container shipping business. He believes the global container-handling market will grow in the order of 6% per annum for the foreseeable future. If that prognosis bears true, then global port throughput will be approximately one billion TEU by Having said that, we see huge differences in growth rates between mature and developing markets, he told Containerisation International, and that is one of the reasons for our investment focus on the latter. Fejfer elaborated: These regions need capacity and better infrastructure and they have shown that, given the capital that is available for our investment purposes, projects in these markets add the most value. CONTAINERISATION INTERNATIONAL 39

4 THE VIEW FROM THE BRIDGE NEXT MONTH: INSIGHT FROM THE C-SUITE /KIM ALEX FEJFERK OKAMOTO, MANAGING DIRECTOR, YUSEN They also contribute massively to the local community. Growth rates for container traffic in the developing world can be more than 10 times higher than in nations like the US, UK, Netherlands, Spain and Italy. This is because in addition to the boost given to international trade by their faster economic growth and industrialisation programmes, there is an active conversion of breakbulk cargo movements to the container. That is not to say that projects are always easy to deliver on, with the APM T chief saying that government regulations, labour agreements, local jurisdictions, tender details and objections, etc, were among the main challenges that needed to be overcome. APM T has faced objections on several fronts on some of its projects, most recently in Callao (Peru), Lazaro Cardenas (Mexico) and Puerto Moin (Costa Rica) but is now moving ahead with all of them. APM T s main emerging markets projects at the current time comprise: In China, the expansion of its facility in Qingdao and building of a new terminal In India, expanding the terminal in Pipavav In Africa, the company s terminals in Apapa, Port Said, Luanda and Monrovia are being upgraded and expanded with a new terminal under construction in Pointe-Noire In the Red Sea, the Aqaba container terminal is being expanded In Latin America new terminals are being developed in Santos, Puerto Moin, Callao and Lazaro Cardenas Nonetheless, Fejfer does not rule out investing in mature markets where he said there were often good local opportunities to exploit and/or where technological upgrades could make a big difference to a port s operations. Last year saw APM T conclude a deal with the port of Gothenburg to take over its container terminal, while recently, it submitted a proposal to the Virginia Port Authority to manage and operate cargo-handling facilities in the Hampton Roads port complex on the US east coast (USEC). APM T is also ploughing capital into building what will be the world s most automated container terminal in the world at Rotterdam. Given the company s current huge development programme, one might think that APM T is doing everything in its power to be the biggest container terminal operating company in the world. This was played down by Fejfer. He stressed: We do not have any ambition to be active in every port in every country in the world as that does not drive value. What drives value is going into a location where we know we can make a difference and where our customers want us to be. He also emphasised that APM T s investment strategy was largely dictated by local business opportunities. He explained: Of course we make a holistic assessment of any project we are interested in pursuing and this means taking a close look at both gateway and transhipment prospects. But the latter cargo sector has much higher risks associated with it. Hence, we would normally only press ahead with a transhipment terminal if we had a firm level of commitment from a customer. He explained that a similar risk assessment was carried out when it came to bidding to develop an existing port/terminal or build a new complex on a greenfield site. In the former, it means evaluating how performance levels can be enhanced, new technology introduced, working practices changed etc, while with a greenfield site it often means more upfront investment. Greenfields are also riskier as there is no existing customer base to draw on and for that reason we will always do our best to minimise the risk by getting up front support from a carrier. Talking in detail about APM T s existing operations, Fejfer claimed that the challenges in delivering consistently reliable services to its customers were getting bigger. There are so many stakeholders involved, he said. We work closely with government agencies, customs authorities, labour and of course our customers to ensure the best possible working environment is in place at our terminals, but things can go wrong and that is usually due to poor communication and leadership. Of course there are Force Majeur situations and civil unrest that cannot be legislated for and where no one is to blame and you have to handle these as best as possible. In both cases, it is the speed with which you recover that is important and the lessons learned. All ITOs are having to handle bigger ships faster as ocean carriers phase in more superpost-panamax units of 13,000TEU-plus. Moreover, the first of Maersk s 18,000TEU Triple E-class series is less than a year away and they are scheduled to call at several APM T-operated facilities. These operators want to turn these ships around in the same time as their smaller units and this can mean ports and ITOs having to handle twice the number of cargo exchanges in a 24 hour period, perhaps as many as 6,000 moves. Bring on the big ships The use of bigger ships is one way in which lines are cutting their unit costs and it is up to us [terminal operators] to help them in this process. A port call should, therefore, be like a pit stop in a F1 grand prix with reliable operations conducted in a minimal amount of time, he said Fejfer sees the increase in ship size as an opportunity rather than a challenge as it will demonstrate the value of ocean carriers and their terminal operators forging closer partnerships. The impact a port/terminal operator has on a line s network becomes ever more important the bigger the vessels deployed, he said. We are an integral part of any supply chain and can help facilitate a cargo s journey in a reliable and service-oriented way. He wants to shift the relationship with his ocean carriers from being purely transactional to being service and value-based. Fejfer elaborated: We are happy to listen MY LIFE IN A NUTSHELL HOW DO YOU KEEP YOURSELF FIT? I like to play the odd game of tennis WHAT BOOKS DO YOU PREFER? I like reading biographies and books on business leaders WHAT IS YOUR FAVOURITE HOLIDAY DESTINATION? I own a small summer house in Denmark and enjoy spending time there with my family September CONTAINERISATION INTERNATIONAL 41

5 NEXT MONTH: INSIGHT FROM THE C-SUITE ALEX /KIM K FEJFER OKAMOTO, MANAGING DIRECTOR, YUSEN LOGISTICS EUROPE THE VIEW FROM THE BRIDGE We do not have any ambition to be active in every port in every country in the world as that does not drive value DATA HUB APM T, including its inland services division, is active in 64 countries and 63 ports APM T handled 17.6 million TEU based on equity in the terminals it runs in H1 12, up 8.6% on 2011 s level APM T s interim revenue in 2012 was USD2.4 billion and its net profit USD395 million APM T is committed to offering value services and high safety levels in all of its terminals APM T s investments are largely driven by emerging markets and gateway cargo to their demands on capacity and productivity issues and come up with deliverables. We are even happy to pay penalties if we fail on the basis that we get something more in return if we consistently succeed. The executive sees partnerships of this nature as reinforcing value in the logistics chain and as benefiting the whole industry, even to the extent of stimulating additional cargo flows. He is also positive about the environmental challenges that ports/terminal operators face, suggesting that with ocean shipping already being the greenest way of moving cargo and the ports being a part of the chain, more business was likely. From strength to strength But APM T is not complacent on this front and at individual terminals is implementing a range of initiatives that will lead to more waste being recycled, emissions and noise pollution being reduced, fuel usage cut and wet lands/nature reserves created. Currently, the terminal operator is in the midst of a retro-fitting programme that encompasses most of its fleet of 400 rubber-tyred gantry (RTGs) cranes with the objective of eliminating 70,000 tonnes of CO 2 emissions annually. Moreover, APM T has committed itself to using electrified RTGs in future developments and procurement exercises. In particular, he singled out developments that will be incorporated into the company s Maasvlakte 2 terminal as evidence of APM T s commitment on protecting the environment. Our decision to use all electrified equipment and green energy-generated power at the terminal will mean a facility that is free of CO 2, NOX and particulates emissions, said Fejfer. Sustainability is in the DNA of APM T and in Rotterdam we are further challenged by the municipality and the port authority and it makes sense for us to go that extra mile with this terminal. In addition, he explained that as part of the 25-year concession agreement ( , inclusive) signed by the operator with the Rotterdam Port Authority, APM T has to ensure that a much higher proportion of cargo arrives and leaves the facility by rail and barge/ coastal shipping services (see Robo Rotterdam, Containerisation International s August issue, pp50-51). At a global level, we are committed to acting responsibly when it comes to the environment as this will enable long term sustainable supply chains to be put in place. On several occasions during the interview, Fejfer stressed the importance of improving safety within its terminals. Earlier this year he appointed Martin Poulsen as internal Safety Activist. He was formerly ceo of the group s European operations. He explained: The reason for doing this is to drive the the safety culture forward to a new degree of excellence. The focus of the safety activist is to mobilise the global APM T organisation to address the constant safety challenges in the operations. We all know that dock work is complex and can be dangerous given the mix of large machinery, labour and external trucks working in a terminal. Our ambition is to eradicate fatalities and severe incidents and to do this I believe we need the mindset of an activist, fighting for a just cause. On the issue of overweight containers and who should be responsible for weighing them should this become mandatory, Fejfer said that APM T would play its part. But he alluded to a number of problems. He stressed: Our company thinks that terminals should play a part in the process, but that liability issues, operational complications, etc need to be taken into account. Ideally the container should be weighed at the beginning of the supply chain before any transportation begins as this issue also extends to road and/or barge safety as well. The current International Maritime Organisation proposal does not sufficiently address the issues and makes this largely a terminal problem and solution when the reality is that all parties involved should solve the problem according to their role in the supply chain. Simply shifting the problem around doesn't solve it. APM T is ready to play its part and when a meaningful forum is established to address this. There has been considerable talk over the past couple of years of port management companies extending their activities into the inland transport, logistics and distribution sectors as a means of offering customers more choice, a greater range of integrated services and of helping to raise levels of efficiency at the marine facilities by speeding up cargo flows. In 2010, the inland container depot and trucking service activities of Maersk Line were fully incorporated into APM T as part of a strategic initiative of the parent group, and since that time Fejfer has selectively cleaned up and developed the business. Principally, this has involved a change in strategy with the company shifting its focus away from supporting Maersk (essentially as a cost centre) with depot, drayage and container repair services to offering these same services as a value-added component to all of its terminal customers, including Maersk. Profit is now driving the business. Following the integration, Fejfer had told Containerisation International: 'In looking over the business it became clear that we did not have to be everywhere and we have identified specific corridors where we feel we can build on our existing presence and offer our customers an improved package.' Subsequently, a number of projects have been put in place, with APM T keen to expand its range of options in markets like Africa, India and across Latin America where ports are often congested and where there is a need to move cargo out of the yard as quickly as possible. Once again it is about creating that value and in a way that results in sustainable and efficient supply chains for all those involved, concluded Fejfer. This is the way we will continue to do business. 42 CONTAINERISATION INTERNATIONAL September 2012

6 We lift a lot more than containers. At APM Terminals, we give the world s markets a lift. With the most geographically balanced global container terminal network in the business, we give a lift to the global economy for the world s importers, exporters and port authorities. We lift the quality of life for our employees, and we lift the standards for safety and sustainability at our terminals. That s how we lift a lot more than cargo containers. For more information, visit us at