March 6 (Bloomberg) -- A.P. Moeller-Maersk A/S, owner of the world’s biggest container-shipping company, plans to add more vessels to its Singapore base after making the city-state its biggest hub after the headquarters in Denmark.
Maersk has about 120 ships under the Singapore flag, the most after 180 in Denmark, Thomas Knudsen, president of the Maersk Line Asia Pacific region, said in an interview yesterday. Additions to Singapore have come at the expense of Hong Kong, where the company now has about 40, he said.
“There’s a maritime cluster around Singapore where you have access to pretty much all the different aspects of shipping,” Knudsen said. “The last five years we have really cleaned up to concentrate on fewer flags to get the economy of scale. You can definitely get lower cost if you go to Panama or Liberia, but we feel that Singapore is a good combination of cost and quality.”
Consolidating the fleet to fewer flags is helping Copenhagen-based Maersk lower costs to weather an industry slowdown. Container lines globally have reduced speeds of ships to reduce fuel consumption and over capacity and mothballed older vessels as falling worldwide consumer demand stints cargo volumes.
“Cutting costs is crucial for shipping lines to survive in the current environment,” said Park Moo Hyun, an analyst at E*Trade Securities Korea. “Shipping lines are looking at every opportunity to find ways to cut costs.”
The container-line said last month profit this year will be higher than the $461 million reached in 2012 as the company reduces expenses and global container demand growth accelerates.
Most of the new vessels Maersk Line will receive, will fly under the island-city’s flag, Knudsen said in Singapore, without elaborating. Maersk, due to take delivery of the world’s biggest container ship in June, will register that vessel under the Danish flag, Knudsen said. The ship will be able to carry 18,000 twenty-foot-equivalent boxes at a time.
Singapore, the world’s second-busiest container-port, has provided incentives to lure companies to make it a maritime hub. The island-city offers tax exemptions and more flexibility in hiring crew members of any nationality to attract more shipping lines to register their ships, according to the website of the Maritime Port Authority of Singapore.
Singapore had the equivalent of 65 million gross tons of vessels registered in the island last year, 13 percent more than a year earlier. That made the city-state one of the world’s top 10 ship registries in the world, according to the port authority. Maersk had 7.5 million gross tonnage under the Singapore flag, the company said in an e-mail.
Maersk, which owns an oil unit and a port-terminal operator, also has nine drilling rigs registered in Singapore, the company said in an e-mail.
About 70 percent of the global jack-up rigs and vessel conversions into floating oil production units are done in Singapore, according to transport ministry. Keppel Corp. and Sembcorp Marine Ltd., the world’s two biggest oil-rig makers, are both based in the city-state.
The offshore and marine industry contributed an output of more than S$16 billion ($13 billion) and is one of the fastest growing sectors in Singapore’s economy, the ministry said.
“I think this place is a basket where we’re putting a lot of eggs for the time being,” Pedersen said in the same interview in Singapore. “We have a very efficient maritime administration here. It’s easy to attract talent and that’s crucial for companies like us.”
Maersk advanced 2 percent to close at 45,880 kroner in Copenhagen yesterday. The stock has gained 7.7 percent this year, compared with a 13 percent climb in the Nasdaq OMX Copenhagen 20 index.
Singapore is also close to new markets for the company. Last month, Maersk Line shipped a container box filled with seafood from Myanmar to the U.S., the first time in about a decade, Knudsen said. The shipping company also plans to open its own agency in the Southeast Asian nation in the second half as trade demand is expected to increase after U.S. sanctions were lifted in 2012, he said.
Myanmar last month cleared about $1 billion in overdue debt with the World Bank and the Asian Development Bank with a bridge loan from Japan, opening the door for increased lending as it seeks to overhaul its infrastructure. The World Bank, returning to Myanmar after more than two decades, is in talks with the government to help the country invest in gas turbines and expand access to electricity.
--Editors: Anand Krishnamoorthy, Lars Klemming