Maersk as a terminal operator

There is an article in Lloyd's List regarding APM, which is the terminal division of Maersk (or A.P. Moller, whatever name they are using these days). The article focuses on the business of running a terminal.

The chief executive of AP Moller-Maersk’s container terminal division, Kim Fejfer, said: “The operator is back in charge. That is healthy for the industry and for the customers because it will come down to who is the best and most efficient operator.”

Mr Fejfer said that the perception had arisen that port development was about “building on an attractive piece of land and then selling it as real estate.”

It's a worthwhile article if you are interested in the business.

I found it slightly amusing, because I recall back when Maersk didn't understand the difference between being a terminal operator and being a steamship line.

I worked for a company which had just gone into a vessel sharing agreement with Maersk. Part of the deal was all of the ships would call at Maersk's terminals.

Problem was, Maersk had never had ships at their terminal which were not their own. They had no idea what an independent terminal operator should do.

The most amusing part was they didn't even have a terminal tariff on file with the Federal Maritime Commission. They kept billing us for demurrage, and I asked them to produce their tariff. They sent me their ocean tariff. I said no, send me your terminal tariff.

After I kept refusing to pay their invoices, I guess maybe their legal department figured it out. We finally came to an understanding that they were the terminal operator and we were the ocean carrier - two separate entities.

Then they allowed us to extend free time on our customers containers if the customer had additional free time in their contract (as did some of their customers).

OK, I admit I took advantage of them and started extending free time on our intermodal containers also, because often they didn't get moved out in time.

Finally Maersk caught on. But, it took them a couple of years.

JOC article "Sinking Feeling"

There is a very good article in the Journal of Commerce, updated Oct. 22nd, entitled "Sinking Feeling". I read it only today. It's rather lengthy, and the following 2 paragraphs I had to read twice to comprehend.


"The deceleration of container volumes also is causing problems at container terminals in the U.S., which were hot targets for acquisitions in 2006 and 2007. Some of the financial institutions that bought into the market borrowed heavily and are struggling to comply with debt covenants, or milestones of volume levels, revenue or returns on equity that the borrowers guaranteed.

When a borrower misses one of those covenants, it is in technical default, even if it has made all the required interest payments on the loan, which may have been syndicated to other lenders or banks. With container volumes slowing, there are reports that one of those borrowers has breached its covenant, and that the financial institution behind the fund that owns the terminal has moved the terminal asset onto its balance sheet in order to protect it. In ordinary times, this might not cause alarm, but with credit being scarce and trust in equally short supply, the creditors are said to be seeking recourse."

Unbelievable.

My first reaction is to say who in their right mind would borrow money on these conditions! But, then I realized it's the same people who said the price of houses will keep going up.

Good grief. No wonder things are in such a mess.