In a time when mega carriers dominate, ACL stands out as a small, independent and yet profitable player. Rebecca Moore spoke to its president, Andrew Abbott
Atlantic Container Line (ACL) has entered 2018 by putting the teething problems that have troubled its new G4 fleet behind it.
Its president and chief executive Andrew Abbott told CST in an exclusive interview that its new fleet of ships has been “plagued with problems” over the past two years. But this is all set to change in 2018.
ACL’s five G4 conros have replaced its entire previous fleet. The new fleet is bigger, faster, more efficient and greener then the previous G3 fleet. At 3,800 TEU they have double the capacity of the older ships but share the same footprint. The company started phasing the new vessels in at the start of 2016.
The first three ships spent three months each in drydock in Germany for repairs and modifications and a fourth was in drydock at the time of our conversation in late January.
Mr Abbott singled out two major reasons why the G4 fleet has needed repairs so early on. First, the design is brand new. “People were learning as they built the vessels because these are not standard off-the-shelf designs; they are unique. We knew we were going to have some teething problems,” Mr Abbott said.
Second, while the vessels were built in China’s Hudong Zhonghua Shipyard, ACL wanted to use European manufacturers for the main components, “because if something breaks down I want to pick it up the spare parts in Europe and not wait weeks to get it delivered from Asia”, Mr Abbott explained. The problem was that, while those components were ordered from European companies, many were built under licence in Asia. “There was too much low-quality production and some of the components were not of the same high standards we had expected,” Mr Abbott commented. As a result, the shipping line is replacing as many of the affected parts as possible with components made in Europe.
But despite these difficulties, Mr Abbott has heralded 2018 as the year when “we finally have everything working properly”. The full fleet will be in operation for the first time in two years.
Another matter will also help ACL with its service: from mid-January this year Sweden’s Gothenburg port has been converted from a direct call to a weekly dedicated container feeder service between the port and Antwerp. This a big change for the company because ACL had called at Gothenburg since it started operating 50 years ago.
Instead, ACL is using public feeders between the other Swedish ports and Hamburg/Bremerhaven. For Swedish roro cargo, ACL has set up a relay service using the Grimaldi Euromed vessel between Wallhamn and Antwerp.
Mr Abbott explained that due to ongoing issues between the terminal operator and labour union at Gothenburg, coupled with inflexible berthing times and spiralling costs, ACL had been experiencing significant delays of up to 12 hours and more, which had a knock-on impact on the rest of its service string.
“Due to the combination of terminal problems at Gothenburg and other ports and ship repairs, our schedule went from being on time every week to very irregular, with lots of dropped port calls,” he said. But a combination of the change from a direct call to a feeder service and the deployment of the full G4 fleet in normal operation “will bring back the old ACL reliability to customers who have been patiently waiting for us to get our act together.”
He observed “It makes things so much easier for our people to manage and gives planning-precision to our customers when our service is on time and there is no double-work anymore.”
He pointed out that the new feeder vessel and mother ship connections must be strictly adhered to each week “or ACL will have empty ships.” ACL will operate this new service for six months and then review it. All the port’s stakeholders – customers, terminal operator and labour – will play a significant role in determining whether ACL maintains, expands or reduces this service thereafter.
Previously, ACL had been studying the addition of a stop in the US South Atlantic States region once its G4 vessels came into service. It currently serves this area of the US by taking slots on Hapag-Lloyd vessels. The carrier had been looking at Charleston, Savannah or Jacksonville because a lot of cargo moves from this region into Germany and Sweden and there is a big forestry export market. But Mr Abbott said this strategy is on a “back burner” now due to the focus of ACL in getting its service “running like clockwork” again.
G4 energy benefits
Despite teething problems, the new ships offer a host of advantages to ACL and its customers. The new conros have the same dimensions as the current ships but double the capacity (3,800 TEU compared to 1,850 TEU) due to their configuration of placing roro cargo in the centre of the vessels and containers fore and aft, as opposed to the normal configuration of roro freight placed under deck and containers on deck. “With the conventional configuration, all the weight is on top, meaning the ship must carry a lot of ballast water,” said Mr Abbott. However, the new ships have much lower ballast water requirements, as they use cargo as ballast.
The new ships were designed with cargo handling in mind. The roro decks have only one set of centre columns, while the decks on the older vessels have two or three. Multiple columns required a lot of manoeuvring to park cargo so stowage is much easier on the G4s, Mr Abbott said. Also, the main roro decks are amidships, so the ramps are much shallower, making cargo handling faster and easier. In the old G3 ships the ramps were steeper, and it was much harder to get heavy cargo up and down.
Furthermore, the car decks on the newbuilds are much higher, at over 2 m, compared with 1.6 m on the older ships. This means that ACL has no restrictions on high-sided sports utility vehicles and minivans, as it had on the G3s.
The energy and environmental benefits are also strong: with the previous ships, for every tonne of fuel burned, ACL carried around 41 TEU on its transatlantic service. But with the new vessels, it will be about 90 TEU per tonne of fuel on the same service, even though they will travel at faster speeds and have twice as much capacity. Emissions per TEU are reduced by 65% and ACL’s environmental footprint will go down by more than 50% for every container carried, Abbott said.
The new ships have been fitted with Alfa Laval scrubbers, meaning that fuel costs will be cheaper as they do not have to run on low sulphur fuel oil.
Asked about the possibility of using LNG, requiring a big tank on board, Mr Abbott pointed out the challenges. “LNG equipment takes up a lot of space on the ship and the refuelling infrastructure is not there yet. We went with scrubbers, so we could use low cost fuel but have zero emissions.”
But he did not rule out LNG in the future. “I am sure that as time goes by there will be technology advancements and more LNG refuelling stations – we will look at it again when that happens,” he said.
Moving to market conditions on the transatlantic, Mr Abbott described them as “horrible”. He said that roundtrip container rates were now at their lowest point in history. “We turn away half of the stuff offered to us now as it makes no sense to carry it. Why a carrier would choose to carry cargo below variable cost for the purpose of market share is a mystery.”
Indeed, one could infer from the market volumes that rates should not be so bad. While eastbound cargo has stagnated since Europe entered its austerity mode and people stopped buying construction equipment for roads and buildings, US imports have been remained relatively strong with the healthy US economy, despite a weaker dollar.
Explaining what he believes is a large factor in dragging the rates downwards is that the larger container shipping lines have been so focused on putting together their new alliances (launched last April) that they are “not paying attention to the profitability of smaller trades”.
He was concerned about the plans of some lines to add more services. “This goes against what is needed if we want profitability back – it worsens the supply and demand balance.”
Small versus large
In a period when mergers and consolidation have led to worries that the dominance of the larger container shipping lines will squeeze out smaller lines, Mr Abbott credits ACL’s profitability to being a smaller, independent player with unique services and tight management control.
ACL was fortunate that it does not just carry containers but also roro cargo and cars. “If we were just a pure container line it would be difficult to make any money on the Atlantic,” he said. And there are other advantages. “We can watch every container and turn it around so that equipment utilisation is higher than the bigger carriers and our staffing is smaller, so we are more efficient.”
Mr Abbott said that ACL and its parent company, Grimaldi, have always made money compared to the big “highs and lows” of the large container shipping lines. He said that “with more mergers and ever-larger shipping lines, the more unique we become. Everyone else is in the same boat so how can they differentiate themselves?”
Mr Abbott highlighted another factor that he felt helped the operator to be in a position of strength – ACL has historically called at unique ports that are different from those that the larger carriers go to. He mentioned Liverpool, Baltimore and Halifax as examples. “We have always sought out places that have something unique to offer. The ability to carry containers, oversized project cargo and vehicles to unique destinations makes us very attractive to certain customers.”
Aside from the challenges on the transatlantic trade, Mr Abbott highlighted another challenge: new trade policies that the US government could potentially implement.
“The US trade deficit has increased significantly, so will there be new protectionism measures? It is the unknown that makes the shipping environment more volatile. Previously we had longer-term trade stability but now governments can decide matters on a whim, so things will change a lot faster.”
ACL has managed to skilfully negotiate both operational and trade challenges so even if new obstacles are created by government measures, there is no doubt that the company will take these in its stride.
Snapshot CV: Andrew Abbott (ACL)
ACL president and chief executive Andrew Abbott started his career at ACL in 1977, when he joined the company as a marketing analyst before progressing to sales administration manager. He left in 1979 and held positions at Waterman Steamship Corp and Orient Overseas Container Line (OOCL) before returning to ACL in 1983 as vice president of US sales and marketing. He worked his way up the company to be promoted to president and chief executive in 2003.
His education includes an MBA in international marketing from New York’s Columbia University and a degree in economics from Humboldt University in Berlin.