SHIPPING AND MORE

Dubai 2018 | MARITIME | B2B

The shipping and logistics industry in Dubai is nearing saturation and big players are using their well-established credibility to branch out into other sectors, especially finance.

Mishal Kanoo
MISHAL KANOO
Chairman
Kanoo Group
Christian  Juul-Nyholm
CHRISTIAN JUUL-NYHOLM
Managing Director
Maersk Line UAE, Oman, Qatar & Iran

How are your Dubai operations developing?

MISHAL KANOO Development will be driven by two solid projects. One is Expo 2020 and the other will be the USD30 billion airport expansion. There will be a mini boom here with these two projects in terms of the accompanying benefits including the overland structure, roads, electricity, cables, and the foreign entities that will come to benefit from the growth. We already see growth because we serve companies that manage infrastructure such as tower cranes and earth movers. Dubai has positioned itself as an entry point for businesses and people; it's a place where one can set up a business, manage overseas operations, and have a transportation hub.

CHRISTIAN JUUL-NYHOLM We launched Maersk Trade Finance in Dubai in 2017. It is a product which competes with the banks, as it allows customers to use Maersk for their financing, and as we hold the cargo as collateral during the transport there is no need for a complex process of documents and guarantees. The product has been well received by the market in the UAE. We naturally only finance businesses which use Maersk Line services. They ship with us, we release the payments to them, and we take care of the collection from their customer at the other end, which means less headache for our customers.
What successful initiatives are you implementing at Kanoo?

MK Success to us is measured by returning customers. In terms of new initiatives, we created a new arm called Kanoo Capital with the idea of creating a small private equity company within our organization, though unlike the private equity, which looks to buy or build a number with debts and then sell off, our plan is to buy and grow. We look at the long term rather than the short term and because we have no pressure from external limited partners, we can be patient as long as it is a healthy cash-generating business. Our business is 127 years old and one thing we focus on and we will continue to focus on is our people; if employees become just a number to the company, we cannot expect them to grow the business for us. We want employees to feel like they are part of the family. Some may feel that is not the most productive strategy; however, in the long run a person giving his or her life to a business must feel appreciated.

What have been some highlights from Maersk over the last year?

CJN The main development has been the EUR4.3-billion acquisition of Hamburg Süd. With this acquisition we have grown our global market position from around 15.5% of the global container market to 18-19%. In the Middle East Hamburg Süd has a relatively small presence. The close down of activities in Iran due to the new sanctions has been in focus—although it represents only 3% of our business in the area, it remains a potential market of 80 million people which we hopefully will be able to serve again sometime in the future. Globally, we have also started a joint venture with IBM to build a block chain solution for the logistics industry.

How will the market in Dubai change in the future?

MK We are racing toward perfect competition. There are several websites and all of them sell a certain product with no differentiating factor. We just want to attract customers to our website and we are quickly moving towards that in e-commerce. Artificial intelligence (AI) will make lives more miserable because one of the things we enjoy in life is unpredictability. With AI, the computer will compute every option available and pick the best option. Looking to the future, the controlling power of companies will be more prevalent than we can imagine. The next company that comes up with this ingenious thing will predict and control everything, including what customers will do, how they will think, and their next move.

How is technology changing the shipping industry?

CJN Technology for vessels will change. Maersk operates more than 700 ships, so we cannot corner our competition with new vessel technology overnight. Vessels have a lifespan of around 25 years, so it will be a while before any new technology is fully adapted. Even though shipping is the most environmentally friendly way to transport cargo, it causes pollution. In 2020 the shipping industry will have to shift to low Sulphur fuel. Maersk Line spends USD3-4 billion on fuel annually and that number can potentially double by 2020. We made a profit of just under USD600 million last year, so this is not a bill we can simply absorb in our daily cost. Cost of shipping will go up in the years to come even as we find more efficient ways to run vessels.