Pacific International Lines (PIL) managing director Teo Siong Seng has given a firm denial on rumours that have recently been circulating that the Singapore-based mid-sized liner operator was the next potential industry takeover candidate.
Speaking at the Marine Money conference in Singapore yesterday, Teo attributed the rumours to articles that appeared after Cosco’s takeover of OOCL suggesting that PIL was the most vulnerable of the four remaining mid-sized liner companies because unlike Zim, Yang Ming, and Hyundai Merchant Marine, it did not enjoy government support.
At the same time, the company had a large orderbook at a time when the market was facing major overcapacity problems that caused boxship values to plummet.
According to Teo, while PIL did not receive any financial support from the Singapore government, it still had the support of banks and, most importantly, its staff.
He admitted that over the last few years PIL, like most liner companies, has faced a very tough operating environment. But he added that the liner trades are showing signs of recovery which should bode well for the company.
“Maybe I am too old fashioned. I believe that with the market recovery over the next two to three years I can create better value for the company, our shareholders and our employees,” he stated.
Privately-owned PIL, which is ranked the twelfth largest boxship player in the world, specializes in niche trades into emerging markets such as from Asia to the Red Sea, Africa and the South Pacific. It does not operate between Asia and Europe and only has a very small on the transpacific trade.
This, Teo explained, has precluded it from joining any of the major alliances as those focus on the big East/West trades.
He described the company as being alliance neutral, with its best option being to work with a variety of suitable partners.
“This gives us a lot of flexibility,” he said, adding that the nature of its niche trades requires PIL to be nimble and flexible, something that it would not be able to be if it was part of a formal alliance.
In recent years PIL has developed strong ties with Cosco covering a wide-ranging co-operation with the Chinese shipping giant on a variety of shipping services. Part of this co-operation saw Cosco Shipping and PIL agreed to a charter pact that will see the two liner operators swap tonnage.
The tie-up will see Cosco lease a 6,500-teu ship and five 4,250-teu ships from PIL, who in return will charter six 5,500-teu vessels from Cosco.
When questioned about the company’s large order book that includes 12 11,000-teu post-panamax ships and a number of other smaller containerships, Teo stressed that there would be a place for them in the company’s fleet, and that he did not anticipate financing to be a problem.
“To say that financing ships in the last two to three years has been difficult would be an understatement. Many banks have withdrawn from the market. Local Singaporean banks have been badly hit by the oil & gas markets so for now you are lucky if they just leave you alone. Chinese banks have been very aggressive with leasing, so we have gone to them,” he said.
When all of PIL’s newbuildings join the fleet the company will join the ranks of large players with a fleet capacity of over 500,000 teus. This should propel it into the ranks of the top ten liner players. Teo noted with some pride that in terms of vessels numbers, the company would rank in third place.
