Wilh Wilhelmsen ASA : WSS agency growth in China bucks global trend

'We've been in China in different ways and forms for close to 100 years but this is the 20th anniversary of our agency joint venture,' said Wilh Wilhelmsen group chief executive Thomas Wilhelmsen, who visited Shanghai for the occasion last week.
He acknowledges that his global maritime services business has just turned in a poor result for the first quarter - but the Chinese market is not to blame for that.

The anniversary comes amid management and ownership changes at Wilhelmsen's Chinese partner, Huayang Maritime Center, which is controlled by China's Ministry of Transport (MOT).

The new head of Huayang, MOT official Wang Lei, is so fresh on the job that it has not yet been decided what title he will hold at WHSS.

But Wilhelmsen indicates that the venture's operations have not been affected by the changes and he expects continued growth.

He gives the credit to Captain Bi Yuping. Bi took over the leadership of WHSS 10 years ago. Since his first full year on the job in 2007, business volume measured in annual port calls has grown from less than 1,000 per year to more than 5,000 in 2015.
Staffing levels are growing China despite global market trends.

'This is a network cost business and not an asset cost business like shipowning,' said Wilhelmsen. 'Our biggest asset is people and it's a business where you can never not focus on the cost side. If volumes are going down, you will have to cut staff.'
But he says this is not currently on the cards for the organisation as a whole and particularly not in China.

'In China we are constantly getting new clients and we have had to expand our team somewhat, instead of downsizing,' said Bi.

He expects to grow in dry bulk and tanker trades - already WSS' biggest sources of agency business globally - and also hopes to build up the lucrative cruiseship side in pace with China's cruise market.

'You could even say it's a good time to go into oil and offshore because, in a tough market, there's a higher willingness to change suppliers,' said Wilhelmsen.
'It's a little hard for us to say that we love poor times because it's good for us. But, in fact, a tough market is an opportunity for us to improve our position in comparison to small and medium-size competitors,' he added, speaking of the company's global market rather than specifically its business in China.

'Customers are trying to squeeze their costs now and, when you're offering quality, it's probably always true that a customer will be able to find a cheaper competitor. But if you use 'mom-and-pop' shops, there is a risk. You might be paying 70% of the cost of a port call up front, so we are talking about significant commitment of funds. And if something goes wrong, you have very little redress if your agent is one guy in a van with a laptop.'
He declines to specify a growth target for WSS' China business.

'If we can just continue the trajectory of Captain Bi's bar graph, that would be fine,' Wilhelmsen said. 'There is no doubt we could be much bigger both on products and on services.

'Good steady growth'
'But the most important target is a good steady growth that we can manage well so as to give back to our customers in the form of improved service. I would not lose sleep if I heard we had a number of port calls that was less than our competitor. But I would if I heard a customer was not satisfied with our development of our service.'
But how Captain Bi's bar graph would look if projected onto the pie graph of the total Chinese market for port agency services is another question.

Government-issued measures of the total volume of port calls in China differ and some counts may include small domestic tonnage that foreign companies would not compete for - but all put the number well above 100,000.

By one observer's estimate, the major global port agencies currently handle a market share of between 10% and 15% of international port calls in China.

Until a partial liberalisation in the 1990s, China's port agency business was a government monopoly - and the three biggest players remain Cosco-controlled Penavico, Sinotrans's Sinoagent and China Shipping.

But they have been joined by an estimated 2,000-plus private companies, mostly small shops serving a single port, as well as global players including WSS and rival Inchcape Shipping Services.

WHSS includes the company's China port agency operations and its project cargo logistics business.

WSS' technical services and marine products sales in China are outside the joint venture as well as shipowning and ro-ro logistics.

Huayang, WSS' partner in WHSS, runs China's largest crewing operation and has a growing fleet of vessels under technical management. But it is not separately involved in the port agency business. By Chinese law, Huayang must hold a 51% share in the venture but the nine branches of WHSS in Beijing and the Chinese coastal provinces are operated entirely by WSS.

'Our experience with joint ventures of this kind throughout the world is that there is agreement to use WSS' operational skills and international network, while the partner adds local flavour and their own local network, and is not necessarily very highly involved in day-to-day operations,' said Wilhelmsen. 'It would make it difficult if everybody was looking over each other's shoulders all the time.'

Captain Bi said: 'What Huayang brings to the venture is a quite wide network and knowledge of Chinese shipping and a long list of clients from their technical management and crewing businesses, besides connections at the central government level in Beijing or in local offices of the Maritime Safety Administration [MSA].

'They are more than willing to give us leads and support but their involvement in the agency business is at the level of the board meeting.'

Huayang no longer belongs to the MSA. It changed ownership last year to another part of the MOT, the China Waterborne Transportation Research Institute. But, as before, its headquarters remain in the same MOT offices in northern Beijing.
'There has been no practical difference for us so far,' said Captain Bi. 'We need more time to see what changes this will bring about.'