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ONE looks to further terminal and container shipping related investments

Ocean Network Express (ONE) is mulling further investments in related parts of the container shipping supply chain as it looks reduce volatility in its earnings.

Over the five years since it was founded Singapore-headquartered ONE has gone starting out its first year in the red, to the last two years huge profits, to the next 12 months which CEO Jeremy Nixon described as “going to be a bit challenging”, in a media briefing on Friday.

ONE remains committed to a $20 billion investment plan between 2020 and 2030 that it mapped out at similar briefing a year ago. The largest portion of this investment is going into ships and the line has secured 54 newbuildings either through lease arrangements or direct ownership, of which Nixon said 20 were so far in operation.

However, ONE has also been making investments in other container shipping related business such as terminals and tonnage providers.

Nixon said that the company could work in reducing volatility in its earnings through the management of its business, including investments in larger, more efficient ships, and digitalisation. “We can get some further stability by gradually building and getting more involvement to the container shipping value chain businesses as well. Then overall, we can further reduce that volatility in our P&L and earnings over the next five to 10 years,” he explained.

In terms of container terminals ONE has joint venture in Singapore with PSA in which it holds a 40% stake. On the US West Coast it is the process of purchasing three terminals that owned by two its three parent companies Mitsui OSK Lines (MOL) and NYK. It is taking a 100% stake Yusen Terminals LLC (YTI) facility in Los Angeles and 51% stake in TraPac which has facilities in Long Beach and Oakland. Nixon said these deals should be completed by the end of the year.

Looking ahead he said: “We will probably look to bring more container terminals onboard overdue in due course, primarily starting with those which are already partially owned by our legacy companies bring those onto our balance sheet.”

The focus is on key hubs and gateways and moving the relationship from one Nixon described as being “tactical” to being more “strategic” and long term in nature. It will also enable the company to look at the P&L and value proposition across the whole operation rather than just the ocean component or the landside.

The other major investment that ONE has made is taking a stake in Atlas Corp, which owns 100% of Seaspan Corp, the world’s largest non-operating owner of containerships. It is move that sees ONE as both a shareholder in Seaspan and also a customer. ONE currently leases around 20 vessels or 12% of its fleet from Seaspan and this number will increase to 35 to 40 ships over the next 12 months, around 20 – 25% of the container line’s fleet.

Speaking about the rationale for investing in Atlas Nixon said: “So while we want to keep the operation of the company separate at the shareholding level, we can have more strategic alignment. And we can look longer term to try to have more strategic involvement with Seaspan in and around the way that we manage our feet with them and think about some of the synergies and opportunities to improve the technical side of the business, and particularly around also newbuilds and decarbonisation.”