A Great Plan In the Works
STX Pan Ocean aims to beef up business sectors, container carrier fleet and harbor logistics operations
STX Pan Ocean had an astounding fourth quarter last year with its operating profit jumping 87 percent, bringing the shipping company¡¯s total annual sales revenue to 6.469 trillion won and an operating profit of 14.8 billion won, thanks mainly to its long-term cargo shipping contracts. The company¡¯s net income returned to the black, reversing 91.1 billion won in losses last year.
The company said its turnaround last year is owed to increases in cargo shipment under long-term contracts, with total cargo shipments coming to 182.2 million tons, a 27.3 percent increase last year, which was up from 85 million tons in the previous year. Cargo shipments make up 82 percent of the company¡¯s annual sales.
President Bae Seon-ryeong said he will steer the shipping company to drastically expand its harbor logistical operations and container shipping to generate more revenue.
He told reporters at the STX Group Headquarters in Namdaemoon-ro in downtown Seoul that the company will benchmark NYK, a giant shipping company in Japan that operates bulk carriers, container vessels and harbor logistical operations, with each of the three sectors accounting for one-third of the company¡¯s total revenue equally. STX Pan Ocean relies on its bulk carriers for about 80 percent of its revenue annually, while the container operation generates 10 percent of the revenues and the rest is divided up among oil tankers, roll-on-roll-off vessels and harbor logistics operations. CEO Bae is fully aware of the concern in the shipping industry that the shipping company has been too dependent on the bulk carriers for its revenue and, therefore, needs to diversify its fleet operations.
Bae said the company will secure two container vessels this year under a plan to expand by 20 percent its container fleet every year over the next several years so that the sector will be beefed up enough to equal the numbers of the bulk carrier fleet. The company now operates 25 cargo vessels including 17 charter vessels and 8 registered under its name. Bae also said the harbor logistics operations both at home and abroad will also be expanded substantially to make the operation an integrated one.
Bae said the shipping company¡¯s harbor logistics operation will go full-steam ahead when the U.S. grain center construction project, in which the company holds a 20 percent stake, is completed in July. Bae also said STX Pan Ocean is considering a plan to build a global harbor and operate it. He also matter-of-factly said the shipping company is faced with a number of serious problems including about 20 million tons of coal and sugar and grain shipments tied up due to the floods in Queensland, Australia, and China¡¯s restrictive policies to control inflation, which might dampen the country¡¯s economic growth. But the CEO expected the situation to turn around in the second quarter with the BDI (Baltic Dry Index) reaching 2,600 on an annual average.
Bae also revealed major projects to be undertaken by the shipping firm this year, which includes a major expansion of its fleet numbers, along with the plans to increase the number of container vessels and harbor logistics operations.
Presently, STX Pan Ocean¡¯s world dry cargo share only comes to 3 percent of the 3.28 billion tons worldwide, or 120 million tons, showing that the company has a lot of room to increase its share, irrespective of market trends. The company intends to expand its share of dry cargo shipments worldwide by 20 percent from last year by expanding the number of the company¡¯s own cargo vessels to 100 from 86, and also expand the number of chartered ships to 550 from 450 and operate them this year.
The company set up a number of new departments to take charge of such matters as new market exploration in such countries as India and Pakistan and African countries. In addition, the shipping firm will open its offices in Beijing and Bangkok to expand its global network of operations, Bae said.
President Bae also told reporters about the plan to stabilize the company¡¯s operations by expanding the number of long-term shipping contracts with the world¡¯s major cargo owners. The company is now in talks in such countries as Russia, Saudi Arabia and the United Arab Emirates to secure long-term shipping contacts with cargo owners. At the end of last year, STX Pan Ocean signed a 25-year shipping contract with Fibria in Brazil, one of the largest pulp producers in the world, which is worth some 5.5 trillion won. In 2009, the company signed a long-term shipping contract with Vale, the largest producer of iron ore in the world, worth 7 trillion won, to transport iron ore. The company aims to post $6.7 billion in sales and $220 million in operating profit this year, which is part of the company¡¯s long-term plan to hike its annual sales to 30 trillion won by 2020 and make itself a global shipping giant. nw
Chairman Kang Duk-soo of STX Group.