SeaGo Line: Come to Stay
SeaNews: SeaGo was established 5 years ago as a regional operator. What was the reason behind this and how did it work out?
Peter Gyde: The original idea of SeaGo Line was that we wanted to create an intra-European carrier with a specific focus on the European trade needs. And the reason for separating it out in a separate company was to create a focus within the organization, because the trade and the requirements of the customers are different from long-haul carriers, the transit times are much shorter, so the cycle times of shipments are much shorter, and that requires a different focus. The European trades are combination of many niche trades and trunk lines, and you need a spider web of services to really cater to that business correctly. And that’s why SeaGo was created, and what I believe SeaGo represents to the market and why it is successful.
SeaNews: What operations did SeaGo Line take over from the “big” Maersk, and how is the business divided, shared and coordinated, what is the relationship between the two companies?
Peter Gyde: The relationship is that we have the same owner, the A.P.Moller Group owns both the companies, and apart from that SeaGo Line is a separate company. Of course, we cooperate on a number of aspects, we share the same equipment, we use the same terminal contracts, SeaGo benefits from the scale of Maersk Line. Maersk Line, on the other hand, benefits from SeaGo’s network around Europe in order to do feedering. Though SeaGo does not do all the feedering for Maersk Line, we do it on competitive terms, where it is the right thing for Maersk Line and the right thing for SeaGo.
SeaNews: So Maersk Line does use other short sea operators and common feeders in Europe?
Peter Gyde: Yes, Maersk Line uses other feeder lines as well.
SeaNews: Now that SeaGo Line has been operating for 5 years, how has the company, its customers and the market itself changed?
Peter Gyde: The concept is still the same, but what has really changed is the overcapacity and the price pressure that many of the long-haul carriers have faced, we have seen an influx of capacity also in intra-European trades. So while the European trades for many years were quite stable – it was the same traditional operators, we have seen a lot of new entrants – some of the Asian carriers have come in, some of the European carriers have made similar structures as SeaGo Line creating specialist outfits for intra-European trade, and that of course changes that competitive environment. But the trade as such remains the same. There are multiple competitive angles to the intra-European trades, as of course there is the sea side, but there is also overland with rail and trucks. And part of that is the focus on the environment from our customers, there has been an interest in both more environmentally friendly as well as more economical transportation modes, and that also has been a benefit for the container trade in terms of containerization of cargo flows.
SeaNews: What are the recent trends in the European market?
Peter Gyde: The current trends are to a large extent driven by the geopolitical situation, as we had to adjust to a different environment in Russia, for instance, the EU sanctions, and that changed some trade patterns we have seen, and in the Mediterranean for instance, Turkey is going through difficult times, economically as well, and being one of the major nations in that theatre, that has an impact on trade flows as well. So we are seeing some of these changes, but overall the trade is relatively stable.
SeaNews: Speaking of the Russian market, what trends do you see in it, and how does the company cope with the general downturn and decreasing imports?
Peter Gyde: The Russian market is also changing in the sense that imports are reducing because the spending patterns are different, and exports are booming as a result of more competitive export products driven largely by currency. So while Russia was traditionally heavy on imports, it is now a balanced market and is probably beginning to lean towards being an export heavy market. And that of course is an important change in a market of the size of Russia. So that has a big impact also on how we operate.
SeaNews: In what way do these changes influence your operations?
Peter Gyde: Well, when you switch from import-oriented to export-oriented, you need to change your products to cater to that – where do you need the fast transit times, how do you get equipment to Russia, how do you service the clients and the needs that they have for access, especially, to the equipment. Then you need to re-think a little bit how you operate. In that sense SeaGo has a backbone the inland side where we operate out of multiple depots across Russia, we connect to the ports by railways, we offer a really very wide operational platform, regardless of where the customer is located. And through scale that really sets us apart.
SeaNews: Do you expect any upturn in the near future in Russia, and what is your forecast for the next year, or, maybe, for a longer period?
Peter Gyde: It is very difficult to predict, but if we look at the macroeconomics, it looks like we’ve been through the worst, and I think Russia is currently stabilizing, and the expectation is certainly that we are going to see now positive development in GDP, so we will start seeing positive growth in the coming years. And that will of course have an impact on the container trade as well.
SeaNews: How do you think the acquisition of Hamburg Sued will affect the operations of Seago Line in Russia and in Europe?
Peter Gyde: When we are talking about Hamburg Sued we need to be conscious that the deal has not been agreed with the authorities in Europe, in the US, in Latin America, and so forth, so I think we should not speculate too much about Hamburg Sued until we really know whether it’s a deal or no deal. But of course, there is an intention and we hope that it goes through.
SeaNews: When Maersk Group announced restructuring its business, digitalization was named one of the priorities for the logistics and transportation segment. How will it work for Seago Line?
Peter Gyde: I think, digitalization is super-super interesting for the shipping industry in general. The shipping industry is still operating largely the way it has done for the last hundred years. Maybe we can issue a bill of lading electronically, but you still need the physical paper in order to transact globally and bring your cargo through customs. So, when you think how we trade, how we buy products on the Internet, how we transport our personal goods across borders, when you buy Nike shoes from the US and you have them sent to wherever. The way that flow happens, it is going to happen the same way in container trade. And in order to make that as efficient as possible we need to adapt to technologies that are there to help facilitate the trade. We are launching the SeaGo Line app, which means you have mobility on your phone, you can track your cargo, manage your account, check your outstandings, and eventually you will be able to book cargo instantly and pay by your credit card for shipments, just like you do in many industries, if you look at the airlines, or retail. And it is coming to shipping as well, so I think, the customer experience in dealing within shipping is going to change fundamentally. And it is going to be instant and it is going to be digital. We are working on that with the new platform that we are putting in place for SeaGo Line, so that we can be at the forefront of that development.
Kirill Atamanov: It has not been an easy time for SeaGo Line in Russia. We have to compete with non-shipping competitors such as trucking companies and railroad operators in a market which is not growing as much as we would like it to grow.
SeaNews: Are rail operators big competitors?
Kirill Atamanov: Definitely! When we talk about Europe main continent traffic then there is always competition between pure overland transportation and short-sea freight. We need to be creative and know our customers well to understand what the value of short-sea shipping is versus overland solution. And actually current market situation in Russia helps us, because trucking and rail are relatively more expensive than short-sea freight and thus we are able to help our clients to optimize their logistics costs. This is how we create value for our clients.
I believe that Seago Line is staying for many more years in Russia to grow the business together with our clients.