SUNDAY, February 25, 2024
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Maersk invests $670m to expand delivery network in SE Asia

Maersk invests $670m to expand delivery network in SE Asia

Shipping and logistics services provider A.P. Moller-Maersk is investing US$500 million to strengthen and expand its supply chain in Southeast Asia, to capitalise on the region’s growing consumption and manufacturing activity.

The move comes despite slowing demand for container shipping and plans by Maersk to cut its investment plans in 2023 and 2024.

The funds will be channelled towards scaling Maersk’s warehouse capacity over the next three years to support its ocean, air and land networks.

By 2026, Maersk expects to add nearly 480,000 sq m, or 50 % more, such capacity across Singapore, Malaysia, Indonesia and the Philippines.

In Singapore, this will involve expanding Maersk’s warehouse capacity at Changi Airport, where it wants to establish a regional air freight hub to support its air cargo business.

It will also include working with the Maritime and Port Authority of Singapore to enable green bunkering facilities here, a spokesman told The Straits Times.

The investments are expected to create a “substantial” number of job opportunities in Singapore, the spokesman said.

Maersk currently runs a workforce of 5,000 in Southeast Asia.

The investments should also help improve the quality of Maersk’s services by ensuring the process of getting goods to customers is smooth and coordinated, regardless of whether an order was made online or in the store.

Customers will have greater flexibility in choosing various transport options such as air, land or sea, and be able to opt for eco-friendly alternatives, the spokesman said.

Maersk is expanding its presence in Southeast Asia at a time when companies are diversifying their production capabilities away from China due to ongoing trade tensions, rising labour costs and concerns about supply chain disruptions. Many are now setting up alternatives in Southeast Asia to manage these risks.

“Global businesses have learnt they should try to develop multiple sourcing options in their supply chains to prepare for any contingency,” the spokesman said.

He added that Singapore has benefited as companies shift parts of their supply chains to the region.

“(Singapore) serves as a major logistics and trading hub for Southeast Asia, offering excellent connectivity, world-class infrastructure, a stable business environment and a strong legal framework,” he said.

In a statement, Maersk chief executive Vincent Clerc said the company’s investments in the region are premised by “an e-commerce boom, government efforts to capitalise on global manufacturing diversification, growing regional brands and rising inter-regional trade”.

The move comes after Maersk said during its third-quarter results briefing in November that the group expects to lower its capital expenditure for 2023 and 2024.

Maersk said the measures were taken due to overcapacity and falling demand for container shipping. It expects revenue and profits for the full year to be lower than forecast as a result of a drop in freight rates and container volumes.

The group also announced an additional 3,500 job cuts globally, taking the total job cuts in 2023 to 10,000. This will help it accumulate savings amounting to US$600 million in 2024.

In a November report on the outlook for the industry, online container logistics platform Container xChange said that supply chain disruptions and geopolitical tensions have impacted the business of shipping along some major trade routes.

Other issues such as an oversupply of containers and ships could potentially lead to “intense competition and diminished profitability”.

Meanwhile, consumer spending caution, influenced by factors such as inflation, interest rates and shifting preferences, is expected to persist, affecting container demand.

“In 2024, the shipping industry will grapple with reduced demand and oversupply, potentially leading to fierce competition, reduced profits, and possible mergers and acquisitions,” Container xChange said. 

Kang Wan Chern

The Straits Times

Asia News Network

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