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BLPL finds a thriving route in shipping's treacherous waters
THE eight-years-and-counting wake of the container shipping industry's long malaise is littered, literally, with the wrecks of the fallen.
With shipping rates still hovering near 10-year lows, about 500,000 20-foot equivalent units (TEUs) were demolished between January and October 2016, according to the latest data from the Baltic and International Maritime Council (Bimco). That is equivalent to the destruction of about 7,800 Olympic-sized swimming pools or 18 Empire State Buildings worth of container volume, and is 4.2 times more than the amount scrapped during the same period in 2014.
Amid all that turmoil, container liner services company BLPL Singapore has found safe waters in which to thrive. The top-ranked winner of the Enterprise 50 (E50) Awards is profitable and growing, and chairman and managing director Mahesh Sivaswamy attributes that achievement to a formula of sticking to what you are good at and doing it really, really well.
"The fact of it is we have never looked at what somebody else has been doing on various other corridors," Mr Sivaswamy says. "We are focused on our own area and that seems to have helped us to come out fairly strong. Now we find people are looking at us and what we're doing."
In a sense, tough conditions are all that BLPL has known since it was started in 2007 as a feeder services subsidiary of Transworld Group Singapore. Back then, Transworld Singapore's Orient Express Lines (OEL) had just lost a major contract, and the group needed to source for containers and cargo to place on OEL's ships.
BLPL started with modest ambitions and a starting inventory of just 300 containers, but its success quickly became apparent within a year, Mr Sivaswamy recalls.
As the company pulled through the 2008 crash in shipping rates, it became clear that BLPL had more than enough to stand on its own rights, he says. Today, BLPL has more than 26,000 containers.
One of the early lessons as BLPL tried to fill its first containers was that it was able to accomplish what its agents did, and more. The company realised that setting up offices in its most important markets was a better way of finding business than relying on third-party agents. Transworld Singapore then used its Transworld GLS unit to open offices around the region - Singapore, Indonesia, Thailand, China, India, Kenya, Malaysia, Myanmar, Vietnam and even the United States.
"Initially with the agents in various locations we were growing, but then we realised that we could find a lot more opportunities if at least in these important locations we had our own offices and our own guys looking at the market so that opportunities could continue coming, which was perfectly correct in our case," Mr Sivaswamy explains.
But why keep the regional focus?
The global container shipping industry is in the midst of a supply glut that has kept rates low since the global financial crisis in 2008. If one needs to put a name to the container shipping industry's misery, look no further than the recent collapse of South Korea's Hanjin Shipping Co. Or the restructure-or-bust desperation of Singapore-listed containership trust Rickmers Maritime. Or Singapore investment firm Temasek Holdings' year-ago decision to sell its entire stake in Neptune Orient Lines.
Mr Sivaswamy takes pains to explain that BLPL has been spared the worst of the global industry's woes because it operates mainly in Asia, which as a region still offers potential for growth. Plying the regional routes meant more than blindly chasing volumes - customers also had specific requirements such as refrigerated units or specialised vessels that made shipping operators also compete on their ability to solve problems.
STICKING TO THE PLAN
"Here we're talking more about smaller-sized ships, and there are a lot of areas where we operate, where we do business, which have inherent problems, like the need for riverboats or draft-restricted boats," he notes. "In that segment of business it's obviously different from the global business, the big ships that can go around the world. They obviously cannot be coming into the shallow draft regions, which we are covering. I wouldn't say it's a complete advantage, because there are other competition, but each time we are able to identify an opportunity, we are agile enough to take it on and put in the right kind of vessel and operate the right kind of opportunity."
The confidence to stick to the plan is founded on both an inherent sense of optimism as well as an acute understanding of the industry.
Mr Sivaswamy sees the industry downturn as a source of opportunities rather than a source of concern.
For instance, the company has been able to buy vessels and containers at bargains as others in the industry struggle. The company has never had to lay off workers.
"What do people do when recessions come? You look at the scenario, you take a call, you think that I need to cut down on the number of people, I need to cut down on people flying around, I need to cut down costs. All the time people are thinking of something gloomy in their minds. But when you're in such a frame of mind, you are always thinking that the economy is down and out. You look at the newspapers nowadays - there is so much bad news. I am not like that. I'm totally different from that."
Driving home that cheery outlook is critical when the industry itself is full of bad news.
"I learn about it, I read about it, but it doesn't affect me because I'm not bringing any of this into our own business," Mr Sivaswamy says, of the industry's struggles. "When I speak to my team and my people, I'm very optimistic, and maybe that also helps to bring out the positive drive."
Of course, that optimism is based on a deep knowledge of shipping.
Mr Sivaswamy has known the industry all his life. His late father started the Transworld Group of Companies in India in 1977, and that group is now run by Mr Sivaswamy's elder brother, Ramesh S Ramakrishnan.
"Even in my university time, I used to go to the office that my father created," Mr Sivaswamy shares. "Those days, the universities in India used to function in such a way that they started at 6:30 in the morning until about 10:30 in the morning. So I'd finish by about 10:30, and by 11 or 11:30 I would go to the office. It has always been such a training. I've just remained, not knowing if I could be better in something else."
That perspective helped him to see bargains where others saw burdens.
"We know our segment very intimately," Mr Sivaswamy says. "So I know the price of that same ship before 2007 versus what the prices are now in the past five, seven years. They have substantially fallen. A second-hand ship that's a 15- or 16-year-old ship, you can probably buy it for scrap value or slightly more. As cheap as that.
"There are plenty of opportunities to be in business and to take advantage of all these things. Containers! There are heaps of containers around the world."
At the end of the day, Mr Sivaswamy gives ultimate credit to the people at the business. Ambitions are one thing; having the drive and the ability to bring those dreams to reality are another.
"We started not thinking that BLPL would be what it is today," he adds. "The people who were working with me were driving the company. I seem to have had the right fit in terms of our people, who had similar passion, similar hunger for growth for the company."