[101019.EN.SEA] Top Cosco Vice President: Carrier Costs Are Down, Its Up To Logistics To Cut Expenses

C0NTRARY to popular belief, the trend towards corporate consolidation in international shipping benefits the customer by providing economies of scale, China Cosco Shipping Corporation executive vice president Wang Haimin told the annual TPM Asia conference in Shenzhen this week.

"It is said that the M&As [merger & acquisitions] in the trade give carriers more bargaining power over customers," he said. "But M&A’s bring economies of scale that lead to lower customer costs too," Mr Wang said in his keynote address.

However it is not all good news. He pointed to the looming deadline of IMO 2020 which mandates costly low sulphur fuel that will increase bunker costs from January 1, as carriers face the choice of building costly sulphur-free LNG burning ships, installing costly payload reducing space for scrubbers or buying scarce and costly low-sulphur fuel that risks shortening engine live - perhaps mid-voyage.

Mr Wang was sanguine on the trade war - so far. He pointed out that trade over all was up slightly and that US consumer demand was holding up well despite tariffs. One factor was the migration of low-end, labour-intensive manufactures from China to South East Asia, a trend that US tariffs accelerated.

In the face of challenges on the horizon, chiefly environmental regulatory costs, the task of shipping - door-to-door - was to reduce every expense possible through digitisation and artificial intelligence. But he warned of the "hype cycle", which too many fall prey to, that is, over-promising what technologies can provide.

Mr Wang said it took about two years for the hype cycle to wear thin, by which time most involved with it grew to know what technology could do and what it could not.

Nonetheless, it was up to every stage in the supply chain to bring down costs. Shipping had done what it could with M&As and the spectacular growth in ship size and the reduction in crew size and slot cost. "The logistics side costs are five times that of those of the carriers, and that is where issues must be addressed," he said.

Source : HKSG.