2011 mmui maersk line business environment

Analysis of Maersk Line Business Environment

Adeline Halim Kesuma (1006792735)Amelia Sudono (1006792943)

Edwin Suparman (1006793315)Elly Wintania (1006793372)

Pande Ketut Yodi (1006794103)

Excerpt Maersk Line, as one of the leading liner global shipping company, faces increasing competition amongst the shipping lines. To stay relevant in the industry, Maersk will have to ensure that it is able to capture the highest market share by means of pricing strategy, routes optimization, and fleet choice. This paper attempts to discuss the global environment (i.e. external) effects on the Maersk Line global business. It will discuss the different factors such as global market condition, environmental pressure, demands in Maersk Line strategy. Ultimately, this paper will also analyze how piracy should be a factor of consideration in the current situation to strategize in the market.

ABOUT MAERSK LINE

Maersk Line is reputedly one of the biggest and most profitable shipping lines in the world1. It owns 198 vessels and operates more than 500 vessels worldwide, handling 1.9 million TEUs2 yearly from all the regions. The sheer capacity of the company is better illustrated below, showing the global network of the Maersk Line.

Source: Maersk Line (adapted)

In general Maersk Line routes have 4 major routes: Trans-Atlantic (i.e. Americas – Europe), Trans-Pacific (i.e. Asia – America), Europe – Far East, Africa – Mediterranean. With such a vast network, it is no surprise and expected that a change in global environment will have an effect in the business of Maersk Line.

To understand more on the global environment consequence and how they are related to the company, we should look at the corporate business strategy. Maersk Line pays attention in its business to the fleet type and size as well as the route optimization as illustrated in below. The decision of fleet size and type will give birth to a vertical diversification. This is exemplified form the acquisition and operation of harbours under APM Terminal (which is under the same AP Moller – Maersk Group) and also horizontal diversification in its supply chain services such as inland haulage and document processing i.e. door-to-door services offered by Maersk Line.

Obviously these decisions will indirectly affect the market price set by the company in lieu of the competition. The decision of the fleet type and size is crucial in this case, as the correct vessel type and size will ensure Maersk to have the lowest cost while still maintaining the operating profit level expected by the shareholders.

The decision on the fleet type and size is obviously affected by the global environment factors such as the technological availability currently, the ever-increasing pressure of being environmentally aware of ecological consequence (i.e. the issue of global warming, for example), and whether there is an actual need for long-haul services by the customers. These three external factors will be the deciding aspects in the choice of fleets.

On the other hand, the global business environment the in shipping industry affects the policy of route optimization. The choice of route will be related to the market demand from the consumers of the need for the inter-connectivity between the two areas. However, we also need to look at the increasing movement towards market integration in the recent years. The growth of manufacturing powerhouse, such as China and Vietnam, and the movement of specific services to a certain area, such as call centers in India, are some examples of how economically, the world has flattened. Also market demand will be affected by the growth of the overall economy as well. Such environmental factors will be discussed in detail in the next parts of this paper.

PRICE

Horizontal / Vertical

Diversification

Market Integration and Market Growth

Market Demand

Market Integration and Market GrowthMarket Integration and Market Growth

Market DemandMarket Demand

Long Haul Demand

Technology

EnvironmentLong Haul

Demand

Technology

Environment

Route Optimization

Fleet Type & Size

Maersk Line Business Strategy

WORLD ECONOMICAL STRUCTURE

International Trade Economic growth, which is evidenced by the increasing volume of global trade, has been a great contributor to the increasing demand for global maritime transportation services. This favorable condition is especially advantageous for a shipping line which offers efficiency in terms of cost i.e. Economies of scale is a crucial strategy to gain market power among competitors. According to UNCTAD (Review of Maritime transport in 2005), 3.8% increase of world output in 2004 contributed to a significant increase of world seaborne trade where it reached 6,76 billion tons or 4,3% increase from the previous year.

In the last two decades container shipping industry has been the fastest growing sector of the maritime sector compared to bulk shipping and others. With annual growth around 10%, container traffic is accounted for more than 70% of international seaborne trade in terms of its cargo value.

Containerization like other industries has a business cycle. Recent studies have indicated that the container industry has reached its maturity stage since it has experienced accelerated growth rate in the past 10 years. However, it will be followed by the declining growth rate where it entered the maturity stage. This will create a limited potential growth in terms of market scope and it will force the container industry to find niche market opportunities such as commodities products that are commonly transported by bulk shipping. Fluctuation and rises in commodity prices and bulk shipping rates, along with the declining cost of container shipping have made containerization as a more favorable option with lesser cost and risks.

Under the assumption of containerization maturity stage in the figure below, the globalization process will slow down since comparative advantageous has been fully utilizied in the manufacturing sectors. The recent financial crisis in 2008, which has caused global recession and declining international trade volume (U.S. has suffered from the recession and lost its purchasing power to import goods from China), will highly contribute to the declining demand in container shipping services.

Source: International Transport Forum 2010, Maritime Transportation: Drivers for The Shipping and Port Industries

Despite the global recession in end of 2008, shipping industries have proven to strive and recovered significantly in 2010. With an outstanding growth rate of 14.5%, they have covered the loss suffered in 2009 when the overall ports output has declined to 8.9% for the first time ever recorded in the industry history.

The recovery was mainly contributed by significant growth of China’s ports, which grew by 17.9% in 2010, followed by South American ports that grew by 17.6%. As of today, nine of the world’s Top 20 ports is located in China. The growth rate is expected to return to its moderate level by 8.4% increase in 2011 with China’s port leading the output gains. Utilization of the container fleet has also recovered in 2010, which can be shown by the figure below where the idle containership fleet has remained fairly steady at 1.9% of the total fleet. Number of smaller size ships that are staying idle has declined significantly, as the demand for smaller size ship has been replaced with the larger size ships. The number of idle units is estimated to decline further in the coming periods. Such conditions can be seen in the figures below.

Source: Alphaliner Newsletter No. 14 – 2011

Source: Alphaliner Newsletter No. 09 – 2011

Maersk Line, as a global transportation company, need to be consciously aware that any change in global economic conditions will directly or indirectly affect the way they do the business. As shown earlier, a slight dip in the market can represent a magnified consequence in the container business, or not. On the other hand, a bullish economic condition may or may not contribute positively to the company’s bottom line. The choice of routes is important in this case, to be able to spot and envisage the potential gain or loss due to global economic conditions.

Geographical Structure

Regional Growth Based on the increasing global trade volume, which has been proven by the growing rate of container utilization, we can conclude that the economy has recovered, and growing to its steady pace. This condition should be sustained with a more efficient and established transportation system. The figure below suggests the possible main routes which will be served by the global shipping carriers.


Circum Equatorial Route has high frequency and large trade volume along the route. Massive investment in ports especially in circum equatorial route to serve the large sized vessels is critical. From the figure above it is shown that more ports in Asia are getting bigger compared to other regions. The expansion of China ports is instigated by the increasing trade volume of China’s products to other countries.

Multinational companies has constructed their production chains and assembling process that exploit the comparative advantage of East Asian countries in terms of more affordable labor and material cost. Foxconn, one of the leading electronic assembling and manufacturing company in China has been in contract to serve Apple, Dell, Sony and other leading global electronic brands. Nowadays, they even reallocated their manufacturing plants and infrastructure to inland areas for the compensation of lower labor cost, rent expense and tax subsidies from the local government.

Source: US Department of Transportation, Bureau of Transportation, Research and Innovative Technology Administration

The extensive flow of imported goods from China to other countries especially United States has created an imbalance trade between both parties. In addition to that, the low currency exchange rate of China to US dollar has also thrusted the flow of imported products from China. Although most people perceived this trade surplus as a good sign for China’s economic growth, the trade imbalance has triggered a question among the economists whether China is able to maintain its power in the global economy and prevent economic turmoil if US and other countries decided to discontinue the import of China’s goods.

In November 2000, China-ASEAN Free Trade Area was established in order to enhances the close economic and trade relations between the China and countries in ASEAN, and contributes to the Asian economic development and the world at large. In this scenario, China holds a key role in the contribution of regional integration since more than half of the total trade of East Asia has been carried out within China region currently. The integration process could be implemented in several ways such as simplification of application procedures for the Certificates of Origin (C/O) and the Customs clearance for companies within both regions. China also decides to speed up the bilateral negotiations on health, plant health, technical barriers and trade facilitation to promote trade liberalization and economic and technical cooperation. It is undeniable that East Asia is gradually moving toward regional economic integration.

Regional Integration

Another factor, which should be considered by Maersk Line, is the shared functions and co-dependence between economies within the region.

In the past decades, the container terminal industry witnessed horizontal and vertical integration processes. Mergers and acquistions are the most obvious, however, we should also look at the assimilation of inland depots, conventional ports and harbours, train network, intra regional terminal network, etc. The figure below shows the different phases of evolution of ports.

Source: International Transport Forum 2010, Maritime Transportation: Drivers for The Shipping and Port Industries On this case, let us zoom into more detail on Asian region. The emergence of major transhipment3 hubs in Asia such as Singapore and Hongkong, gives the evidence that the face of Asian transportation has evolved rather significantly. However, is Asia moving towards regionalization of transport industry? We are of an opinion, unlikely at least for now. Regionalization should be supported by a good network assimilation and connectivity of various mode of transportation. A link between an harbour with an inland depot, for example, must be supported by good infrastructure of roads and railways.

The fact that Asian infrastructure is notoriously imbalanced in terms of development, hinders the effort to regionalize Asia4. One way to measure the integration of one country to the shipping network (i.e. the connectivity to maritime shipping and as a measure of trade facilitation) is by using The Liner Shipping Connectivity Index (LSCI)5. It reflects the strategies of container shipping lines seeking to maximize revenue through market coverage. The countries that have the highest LSCI values are actively involved in trade. Namely, the export-oriented economies of China and Hong Kong rank firsts, which the transshipment hub of Singapore ranking third. Large traders such as the United Kingdom (6), Germany (8) the United States (9) and Japan (15) also rank among the top 15. Countries such as Malaysia (10), Spain (11), the United Arab Emirates (16), Egypt (17) and Oman (19) also rank high because of the major transshipment function their ports perform. Do look at the map below showing the amount of traffic handled by different major ports around the world.


Unsurprisingly, Asian region handled the most TEUs. This is contributed by 2 main factors: population (hinterland size) and Asian role in global economy6. Most of the biggest global ports are located in Asia.

However, it is technically and economically impossible to establish direct shipping connections between every country7. There may not be enough volume or the ports may be far too distant from one another. Unlike bulk shipping, container shipping networks are established. Hence, the rise of transshipment hubs as mentioned earlier.

Let us take the example of Singapore ports. 92% of Singapore’s traffic is transshipment. It is amazing that a country with residence of about 4 million people can generate traffic of more than 28 million TEUs as of 2011. A rising star such as Singapore is not necessarily surprising, considering the limitation of Asian infrastructure as mentioned earlier. However, the point is that the rise of a port to be a major transshipment hub such as Singapore should be considered by Maersk. The Case of Route Optimization We can see earlier that there are external factors such as the increased co-dependence of inter-regional trade, imbalances of trade, emergence of major hubs, and the potential of regionalization. These factors, obviously, will influence Maersk Line to decide and plan on the most optimized route to ensure: enough cargoes from each stops, connection of ‘crucial’ areas to ensure market presence, and the economics of cost.

SUSTAINABLE DEVELOPMENT

Contribution of Shipping Transportation to Environment

Despite the fact that shipping is the most efficient mode of transportation compared to trucks or airplanes, it is unarguable that ships also produce a substantial amount of Carbon dioxide emissions and other greenhouse gases to our environment8.

The figure below shows Carbon Dioxide emissions from global shipping activities which

are estimated to account for 1.6 per cent to 4.1 per cent of world Carbon Dioxide

emissions from the fuel combustion.

Source: UNCTAD, based on IMO 2000 Updated Study on Greenhouse Gas Emissions from Ships, 2008

The increased concentration of Carbon Dioxide in the atmosphere has been the major contributor to the increased climate temperature change, which is known as the global warming effect. To ensure that the increase in temperature does not exceed the normal limit, the concentration levels of Carbon Dioxide in the atmosphere should be stabilized between 350–400 ppm, where emissions should peak by 2015 and decline thereafter. In addition to that, over 90 percent of world trade is carried across the oceans by some 90,000 marine vessels. This condition implies that global shipping activities contribute significantly to Carbon Dioxide emission. In fact, if global shipping activity is compared as a country it would be the sixth largest producer of greenhouse gases following the United States, China, Russia, India, and Japan as illustrated in the figure below.

Source: Oceana Shipping Reports: Shipping Impacts on Climate

Although emissions from global shipping activities are significant, ships with larger size have good record in fuel efficiency and environmental friendliness than other modes of transportations.

The table below illustrates that sea transportation is by far the most efficient way of cargo transportation in energy consumption. It also shows, expectedly, that large vessels are more efficient than smaller vessels. The table also indicates that shipping transportation has room for improvement in terms of SOX, NOX and PM9.

Source: Network for Transport and Environment

On a per ton kilometre (km) basis and ship sizes, Carbon Dioxide emissions from

shipping are lower than emissions from other modes of transportation. As shown below, emissions from railway transportation could be 3 to 4 times higher than emissions from tankers. While emissions from road and air transportation could, respectively, be 5 to 150 times and 54 to 150 times higher. Equally, in terms of fuel consumption (kilowatt (kW)/ton/km), a container ship (3,700 twenty-foot equivalent units (TEUs)), for instance, is estimated to consume on average 77 times less energy than an aircraft (Boeing 747-400), about 7 times less than a heavy truck and about 3 times less than rail10.

Source: Maersk Lines Environmental Report 2007

Evolution of Container Ships

Due to increasing global trade volume, shipping carriers have continuously modified the size of their vessels to conform to the economies of scale strategy. By having larger vessels, they will be able to optimize the fuel consumption, which ultimately reduces their operating cost.

Fuel cost effeciency is very crucial in the shipping industry since the oil price trend is always increasing over the time and fuel cost approximately accounts for 50% of the total operating shipping cost. The figure below shows that the dimension of vessels has almost doubled in the past 40 years.

Source: Port Technology International Issue 34

The largest Maersk’s vessel until now is Emma Maersk with 11,000 TEUs capacity. Maersk has signed contract to build ten unit of Triple E , the world largest vessel withcapacity of 18.000 TEU , 16 % greater than Emma Maersk, but lower in fuel consumption, CO2 emmision, and unit cost11. All those are analogous to the naming of Triple E, which stands for Economies of scale, Energy-efficient and Environmentally improved.

Crane Size and Cost Increases

With the increasing vessel size, there is an increasing need for the size and quality of equipments to serve them such as the quay cranes. However, evolution of the harbors size, equipment availability is not fast enough to follow the trend of vessel’s size.

Also, any improvements require an extensive infrastructure capital cost. The tandem lift crane approach12 requires considerable additional capital cost and potentially higher wharf expense either to build new or modify the existing structure. With larger equipments deployed, terminal operators will face a variety of costs such as maintenance, fuel, and consumables. Hence, thorough business analysis from the operators are needed preceding the investment. And this should be a concern and consideration for Maersk to move into bigger vessels.

Evoulution of capacity and cost of cranes from generations to generation can be found on the figure below.

Source: Port Technology International Issue 35

Previously, we have talked about how the Asian region is the busiest region in terms of cargo globally due to the hinterland demand and the emerging role in manufacturing. It was also discussed that an increase in vessel size should be supported by the proper infrastructure. The figure below shows shipping density and hectare per port. With respect to that picture, shipping activity will be very high on the world’s busiest port, such as China’s ports. When big size container ship goes into this busiest port, it needs bigger cranes and also more hectares per port to handle the loading and unloading activity.

The irony of this situation is of course the cause and effect of switching to a more fuel efficient vessel. No doubt that the bigger vessel will means better emission standard and fuel efficiency, but it comes at the expense of the need for more land to be cleared to serve those bigger vessels – the oxymoron of development.

Source: International Transport Forum 2010, Maritime Transportation

Even though it is clear that the energy requirements for cargo transportation by Maersk vessels are lower per ton of cargo than any other mode of transportation and has the lowest overall impact on air quality as shown in the figure below. Maersk constantly seek to identify and implement cleaner and more fuel-efficient means in order to maximize energy efficiency and reduce air pollutions from their vessels.

Source: www.maerskline.com

We can see very clearly how the pressure of being more environmentally conscious has forced Maersk to reconsider of its assets (i.e. vessels). However, Maersk Line will also need to be aware of the consequences of the choice of vessel is depending on the availability of infrastructure and equipment to serve them.

Emma Maersk in Singapore being served by 10 Quay Cranes

Technology Solutions & Opportunities

There are some immediate technological solutions to solve the environmental concern for Maersk available in the market. Perhaps the simplest of all is simply speed reductions.

Speed reductions yield immediate and sizeable reductions in emissions and fuel costs. Emissions (such as COx, PM, NOx, & N2O) are directly proportional to fuel consumptions. Thus, when ships travel at very high speeds, the fuel consumption and emission will be high.

The IMO (International Maritime Organization) and Hapag-Llyod has done calculated with respect to the relation between ship speed, fuel consumption and emission. IMO shows that a speed reduction of just 10 percent across the global fleet would result in a 23.3 percent reduction in emission. Hapag-Llyod found that slowing their ship speed by just five knots, or 20 percent, resulted in savings of around 50 percents on fuel cost.

Source: Energy Information Administration and Bureau of Labor Statistics

Graph above indicates that oil price trend increases over the years. Ship speed reduction is unarguably one of the solutions to anticipate the increased fuel cost. From the explanation above, reducing ship speed will reduce fuel consumption, therefore cutting the fuel cost.

Hence, as speed reductions are not only the effective and easy way to reduce emissions but also can cut your fuel consumption, it does not only give benefit environmentally but also economically.

Another problem for Maersk Line to be considered due to the speed reduction is the delivery time of the cargo. Inevitably, reducing speed means more time travelled between destinations. This might or might not affect the consumers. Some time-sensitive cargo such as perishables or spare parts, might be affected due to the longer sailing time. Maersk should consider the type of cargo served between two destinations and consulting the related consumers before deciding to cut speed on certain routes.

Switching to Cleaner Fuels Can Reduce Emissions across the Board

Most of shipping company use low quality residual oil because of its low cost, around $550 per metric ton. Low quality fuel means high content of sulfur. The sulfur content of residual fuel is varying, but typically averages 2.5 percent.

Switching to low sulfur fuels would reduce emission of fine particles, including black carbon, as well as carbon dioxide, nitrogen oxide, and nitrous oxide. Marine diesel oil and marine gas oil are example of cleaner fuel contain 0.5 percent sulfur and 0.1 percent sulfur, respectively.

Based on IMO (International Maritime Organization), the usage of marine diesel oil or marine gas oil is summarized on the table below.

Source: IMO (2000) and Winebrake, J. and Corbett, J. (2007)

Thus, two simple steps are available for Maersk to alleviate the ecological impact due to its operations. Other steps such as cold ironing13, air cavity system, and hull design improvement14 are available.

From the above explanations, it is clear that the choice of fleet type and size are limited by the technological availability in the market and the infrastructure constraints of the serving harbors.

Undoubtedly, the market demand for long haul services will also drive Maersk in choosing the most optimal type and size of vessels. However, we can see that with the growing pressure towards environmental protection, Maersk will be forced to be more fuel efficient and reduce emissions using the most effective and available technology currently. All these external factors will be the drivers towards Maersk’s goals.

Other Factors: Global Political Risk and Piracy

With the political instability heightening and the ever-changing map of global political risk, it is becoming more crucial for businesses (specifically Maersk Lines in this case) to make a thorough assessment across all its global operations and investments, and plan accordingly on the future potential risk.

It is no rocket-science that a continuing economic turmoil may impact significantly on the on the levels of stability and political risk of the global businesses – which may outlast the recession15. In the recent times, we observed the political uprising of northern African and middle-eastern countries (which were partially fueled by the widening gap of the rich and poor). Let us take a look at the map below showing the 2008 global political and piracy map16.

Source: 2008 Economist Intelligence Unit Risk Briefing and various sources

A quick look at the map shows that the Europe – Far East route is the most hazardous route: passing countries with medium to high political risk countries, through the Suez Canal, and finally reached the Gulf of Aden – an area with an extremely high risk of (Somalia) pirates. Although this is not the only route affected, others such as Middle East – East Africa, or India – Central Africa routes bear the brunt as well.

The effects on Maersk on this are two folds: Revenue and Cost.

Let see a specific example of Libya. The recent western sanctions on Libya were already hurting the shipping industry17. The traffic in and out of Libya definitely dropped quite substantially. London’s insurance market had added Libya into a high-risk area which adds to the war-risk premium on shipments. The domino effects will hurt trade

more. The market will reconsider the destination once the situation stabilized, and this will not be immediate. Hence, political instability forces Maersk Lines to reconsider the port of calls and analyze whether it makes business sense to stop or even pass a certain area. On the extreme-side re-routing might be needed.

The effect of cost is clearly illustrated in the exposure of shipping line to piracy risk. Firstly, any vessel going through an area with high risk of pirates’ attacks will have to forego the slow-steaming option. This is obviously for security reasons. Hence, Maersk will have to sacrifice the fuel-cost savings due to this. Secondly, If any vessel is attacked and held ransom, shipping line will normally want to get over it as quickly as possible by paying the ransom. Any exorbitant ransom paid will still be better than freezing the vessel, causing the shipping line opportunity cost due to the loss of business and potential loss of business due to customers’ lack of confidence.

The third effect is of the increased cost of insurance. Why the increase? To explain this, the figure below on the number of attacks for part of the year 2008 and 2009. The figure explains the increasing threat of pirates’ attacks for part of year 2008 and 2009.

Source: Lloyd 360°Global Insight on Global Risk

In fact, piracy insurance premiums are about 10 times what they were a year and a half ago — due entirely to the increased threat off Somalia18. Although insurance cost is not a large part of operational cost for shipping lines, such as Maersk (normally not more than 3% of operational cost), it is still need to be monitored. With the increasing goal to fight piracy by all shipping lines, it is anticipated that the danger of piracy will be reduced in the future.

Conclusions

Shipping carriers have invested heavily to absorb the rapid recovery from the weak demand caused by economic recession in 2009. The growing international trade volume is expected to contribute an increase of 8.4% annual growth of container throughput. This condition implies that, despite the maturity stage in container industry, the demand of container utilization as the main transportation mode is still significant.

The rise of manufacturing sectors in Asian economic growth also enables a strong position of Asian countries towards economic independency from Europe and Western countries, such as United States. Trend of regional integration especially in Asia region has created less geographical borders between regions. Small ports are being replaced by major ports, which finally emerged as transshipments hubs. Therefore, a thorough analysis to choose the most optimal routes that serves these major transshipment hubs will be a challenge for Maersk Line, to gain competitive advantages in the shipping industry. On the other hand, Asia should strive to establish and improve a better infrastructure system and technology in ports, along with reliable inland transportation system. All these will ensure the regional integration can function more effectively.

Source: Alphaliner Newsletter no 09 – 2011

From the figure above, it is illustrated that 66% of the 2010 Maersk container volume belong to long haul routes (comprising Asia-Europe, Trans-pacific, Trans-atlantic and Oceania). Increase in long haul demand routes along with environmental pressure to reduce emissions has influenced the choice of Maersk Line’s fleet type and vessel size.

The issue of security should always be included in the long-term goal planning of Maersk Line. Looking forward, Maersk Line should continuously monitor the evolution of global trade, technology, and consumers’ demand trend to constantly shape the corporate strategy to achieve its objective.

Maersk’s Volumes 2010

NOTES

1 Maersk Line recorded an operating profit of almost US$ 3 Billions in 2010, a great bounce from a loss of almost US$ 2 Billions in 2009 due to the crisis. Source: Alphaliner Newsletter No. 17/ 2011. 2 Twenty-Equivalent-Units i.e. a unit measurement corresponding to a 20 feet container. 3 Transhipments or ship-to-ship transportation is a term used in which cargoes are stored ‘in transit’. These cargoes will be distributed regionally using feeder or small intra-regional service to other smaller ports. 4 Asia’s trade competitiveness depends heavily on efficient, fast, reliable, and seamless infrastructure connections. However, many parts of Asia are isolated economically as well as geographically. While some of the existing infrastructure is world class, much of it is below average. Source: Infrastructure for Seamless Asia, Asian Development Bank 2009. 5 The Liner Shipping Connectivity Index captures how well countries are connected to global shipping networks. It is computed by the United Nations Conference on Trade and Development (UNCTAD) based on five components of the maritime transport sector: number of ships, their container-carrying capacity, maximum vessel size, number of services, and number of companies that deploy container ships in a country's ports. 6 The best estimate for Asian population is almost 4 billion people. Besides the hinterland size, hence the demand for goods, Asian region is also known for the centre for cheap manufacture and fabrication. This contributes the size of traffic going in and out of Asia. 7 17% of all country pairs are directly linked, 62% of all country pairs need at least one transshipment, 18.6% of all country pairs require two transshipments. Source: International Transport Forum Paper 2010. 8 Source: Shipping Impacts on Climate: A Source With Solution, OCEANA, July 2008 9 Emissions standards are made to regulate the emissions of nitrogen oxides (NOx), sulfur oxides, particulate matter (PM), or carbon monoxide (CO). 10 The Network for Transport and the Environment (NTM) data published in Environment, Container Shipping Information Service, 10 January 2008. See also World Shipping Council (2008). Record Fuel Prices Places Stress on Ocean Shipping. 2 May 11 The Triple-E will produce 20 percent less CO2 per container moved compared to Emma Mærsk and 50 percent less than the industry average on the Asia-Europe trade lane. In addition, it will consume approximately 35 percent less fuel per container than the 13,100 TEU vessels being delivered to other container shipping lines in the next few years, also for Asia-Europe service. Source: www.maerskline.com 12 A tandem lift crane approach involves lifting two 20-feett containers at the same time. Thus, doubling the productivity of the equipment. 13 Cold ironing is where vessels that are docking at ports will shut off their engines and plug into the port power. 14 Improving hull design to reduce fuel consumption and gas emission is done by reducing the friction between the hull and the water. One of the most effective ways of doing that is to encase the hull in a layer of air, or bubbles. The other is air lubrication uses compressor to blow air under vessel.

15 Llyod’s 360° Insight on Global Risk gave a detailed analysis on the effect of global recession on the increased global risk as the recession intensifies. It opines that the global recession will increase the expropriation risk of businesses. Although we do not out rightly object on the risk elevation contributed by the economic turmoil, such somber view is not supported by us. 16 The map shows the 2008 condition. Recently, due to political instability in some of the Middle East and North African countries, the map might change. However, the figure is still a representative look on the volatility of European – Mediterranean – Middle East route. 17 Source: Sanctions kill of Libya’s vital shipping trade, Reuters, 14 March 2011. 18 Source: As Insurance Piracy gets pricier, Owners try guards, NPR, 8 May 2009.

References Rodrigue, Jean-Paul. Maritime Transportation: Drivers for the Shipping and Port Industries. Paper Commissioned for the International Transport Forum, 2010. -. Alphaliner Newsletter Issue No.09. 2011. -. Alphaliner Newsletter Issue No.14. 2011. -. United Nations Conference on Trade and Development Summary of Proceedings. United Nations, 2009. Harrould, Ellycia. et al. Shipping Impacts on Climate: A Source With Solutions. Oceana, 2008. Rudolf III, C.Davis. Ship-to-Shore productivity: Can it keep up with mega-ship size increases? Part 1 and 2. Port Technology International, 2007.

Bergsten, Fred. C. China and Economic Integration in East Asia: Implications for the United States. Peterson Institute for International Economics, 2007

Gaulier, Guillaume et al. China’s Integration in Asian Production Networks and Its Implications. Paper prepared for the conference “ Resolving New Global and Regional Imbalances in an Era of Asian Integration”. Tokyo, 2004

-. Maersk Environmental Report 2007. Maersk, 2007. Various Maersk Line presentations, Reports, and Internal Articles. Online sources: www.maerskline.com www.wtrg.com

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2011 mmui maersk line business environment