Widdows: Carriers have ‘mindset problem’ about collaborating beyond port-to-port

The former NOL chief told the TPM Asia conference he expects transpacific rates to continue to drop in 2016. and carriers need to cooperate on landside operations to overcome structural challenges and low rates in the industry.    Ocean liner industry veteran Ron Widdows told the TPM Asia conference in Shenzhen Thursday that he expects transpacific rates to drop in 2016 spring contract negotiations as an influx of larger vessels from Asia-Europe cascades into the trade.
   He said worries about excess capacity in U.S. trades ignores the fact that the biggest ships in operation have yet to even be regularly deployed in that market.
   Widdows, former chief executive officer of APL parent NOL and current chairman of the World Shipping Council, said rates will decrease and “probably by a lot” because of a supply-demand equation that is already out of equilibrium and set to accelerate further as larger ships transition into the transpacific.
   More than discussing rates though, Widdows (who is now serving as a senior advisor to the consultant McKinsey) presented a view at the conference that there has been a structural shift in the liner industry that carriers – particularly smaller ones – have to react to.
   “Scale has become a more significant differentiator than before,” he said. “That’s because the difference in scale is so much bigger than before. When you’re competing with a company four or five or six times your size, how do you compete? The scale game is over. (Smaller carriers) can’t invest enough money organically to catch up.
   “They have no choice – they have to operate in an alliance structure. Smaller carrier used to be able to participate in the global game but not anymore.”
   Widdows advocated that carriers cooperate on landside operations as they have port-to-port within the four major east-west alliances, adding that the lines have stripped out all the costs of operations they can reasonably achieve.
   “These are not the foibles of the cosmos,” he added Widdows. “This is not a cycle. This is structural.”
   As an example, Widdows recommended carriers already in an alliance create a common platform to provide data to railroads to better coordinate intermodal rail connections.
   “Imagine you’re (Union Pacific) railroad,” he said. “From (the) G6 (Alliance) you’re getting information from six different guys, six different times, in six different formats. A mess. The flow off the ships, the setting up of yard is all done differently by those carriers. There’s little cooperation between members.
   “Imagine if there was an entity that had all the information from all six to communicate to the railroad.”
   The stumbling block, of course, is ages-old carrier reticence to share key aspects of their networks, even with other carriers that they partner with on a port-to-port basis.
   “I wouldn’t have shared the intermodal network at APL with anyone,” said Widdows. “OOCL has a terrific intra-Asia network that’s outside of the alliance structure. Every carrier has some component they jealously guard. But the world is changing and that may not be possible anymore.
   “It’s not a technology problem, or a regulatory problem. It’s a mindset problem.”