He was sharing his insights on The Changing Dynamics of the Container Shipping Industry at the Singapore Maritime Lecture, organised by the Maritime and Port Authority of Singapore, on Wednesday.
Tung, OOIL chairman, president and ceo, said in an interview that while shipping lines are now investing in megaships, which helps reduce unit costs on the ship-side, land-based costs also made up a significant portion of a carrier’s overall expenditure.
“There are a lot of shore-side operations that you need to manage. In fact, the shore-side expenduture is quite a bit higher than the sea-side. It really needs you to think more than the ship-side in how you manage your business so you can create operating margins. This is really the dynamic of our industry.”
In joining forces on both the ship and land sides, shipping lines can reduce operational overlaps and generate cost savings, which would benefit the consumer.
Even if carriers were to agree to do so, they still need to jump over some major anti-trust hurdles across the world. As it is, governments around the world are already keeping an eagle eye on industry players to ensure that they do not contravene their respective anti-trust laws.
As Tung puts it succinctly, “Currently, we are not allowed to do that.”
Just whether carriers are likely to get the green light for closer cooperation, he replied candidly, “I don’t know. I just want to put the case forward.”
Tung also pointed out that greater collaboration among carriers may not necessarily reduce competition.
With closer cooperation, he said, “If that takes place, is that good for the market, is that good for the consumer? Because you would tend to have a lot fewer players in the industry, I would imagine that the competition level will be reduced. However, if you are allowing more cost-saving capture, more smaller companies would have the capacity to compete with the bigger companies, therefore preserving the competition.”
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