Friday, January 09, 2009
Shipping CEO predicts improvement of industry as economy gets better
Friday, 09 January 2009
Chief executive officer of the Mediterranean Shipping Company (MSC) Nicola Arena has a positive outlook for the future of the shipping industry worldwide, stating this bodes well for the growth of the industry in Grand Bahama. Arena was speaking yesterday at the Rotary Club of Lucaya's weekly luncheon meeting, where he gave an update on the status of the industry. "Last year was the most incredible year in the history of shipping because for the first eight months freight rates were astronomical. We made a lot of money, all in shipping... then all of a sudden, around July or August, the rates collapsed," he said.
Arena attributed this to a variety of causes, including a reduction of exports from China, and all of the financial problems in the United States, which spread to the rest of the world.
"All of a sudden, there was no more credit, so people would not be able to export so easily because banks could not finance credits because of lack of funds," he explained.
"The other point of course was that we ourselves as ship owners, we built too many ships. Once they make money, they invest in buying more ships and everybody sometimes overextended themselves."
As a result, Arena said during the next couple of years, some very prestigious companies may encounter serious problems in getting banks to finance their ships.
"Some companies have over 100 ships under construction and the shipyards want to be paid. We are foreseeing that some weak companies are going to be sold or could go out of business completely," he said.
The current downturn is not new to Arena, who has been involved in the shipping industry for some 48 years. According to him, the pattern of boom and bust occurs every 10 years or so.
"There is a boom, people start spending, people get themselves in debt, then there is a crisis, then the recession comes, then your house goes down, then your ships go down, a lot of airlines go out of business," he said.
"So this is a cycle. I would say that we should not dramatize. Shipping is always going through cycles. Every eight to 10 years, we are going to face a period of big growth and then a collapse, very sudden. The moment after the economy stabilizes, automatically shipping will revive."
The CEO also shared that although MSC is indeed feeling the effects of the economic downturn, it prides itself on the fact that it has not had to lay off any of its employees.
"I am proud to say that our company, although we are hurting, we have a very strong policy against layoffs for economic reasons. We expect loyalty from our employees and by the same token we are loyal to our employees," he said.
"I think this is a good investment, because the crisis will be over. It might be six months, maybe one year, maybe longer, we don't know."
One good reason for sticking to that policy, he added, is that the company strives to maintain its level of customer service.
"We believe that international transportation is a very complex business. If you start changing too many employees, inevitably your service starts deteriorating and we believe that this should not happen," he said.
"We want very much to be able to assure the quality of service, we worked so hard for so many years to be able to continue the same way."
Arena's optimism about the worldwide economy also lies in the outcome of the recent election in the United States.
"No matter who is the president of the United States, they are going to have some problems to solve, sometimes you have to make tough calls, but a new generation of politicians is all good. It helps to create positive feelings," he said, adding that he also expects to see some stability in the banking sector within the next couple of months, which he said is the first step toward improvements for the shipping industry.
At the end of the day, Arena said he is confident about the stability of the company and its future in The Bahamas.
"The entire economy of the world is based on international trade and international trade cannot survive without shipping. Ninety-five percent of all manufactured products travel by containers," he said.
"We have over 100 people working in the United States and 64 in The Bahamas. We've been growing very much in this country, we made big investments, especially in Freeport, and hopefully we will be able to keep growing."
As adapted from The Nassau Guardian
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