Domestic carrier Lorenzo Shipping Corporation (LSC) is eyeing higher volumes this year as it is optimistic about the positive effect on shipping of the Philippines’ growing economy and expanding opportunities in the logistics industry.
“We are very confident that the increase in GDP and the expansion of the economy will also spur a growth in shipping,” new LSC president and chief operating officer RJ Madamba told PortCalls in an interview. Madamba said the optimism also derives from the positive outlook of its customers for their volumes, as well as from opportunities brought about by the government’s massive infrastructure program.
Madamba said LSC targets a conservative increase of 10% in shipments for 2018 from last year’s volume, anticipating growth to come from major customers as well as the significant contribution of northbound shipments.
Madamba said they expect the acceleration of the national economy to also propel growth in shipping and demand for logistics services. He noted that since the Philippines is an archipelago, shipping is still the most economical mode of delivering goods throughout the country.
On the government’s infrastructure program, he said LSC expects to benefit from increased demand for cement, steel, heavy equipment, and other construction implements across the Philippine islands.
“In the long run, the multiplier effect should be in the form of increased movement of goods due to easier access from source to markets, with FMCGs (fast-moving consumer goods) as one of the major commodities that we transport,” Madamba said.
He added that most of LSC’s clients, approximately 80% of which are in the FMCG sector, have projected increases in volumes this year in line with the expansion of the Philippine economy.
He noted that LSC is right-sizing and rationalizing its containers as it forecasts more demand for class-A containers used by FMCGs. He added that more clients are now utilizing 40-foot containers for the domestic market in order to achieve better returns to scale.
Madamba said he is also seeing “a lot of industry cooperation” such as slot-sharing.
“Just like the international shipping industry, we can see opportunities for cooperation between compatible carriers to maximize the return on fixed costs and eventually offer better value-for-money transportation services to customers while guaranteeing industry sustainability and stability,” Madamba said.
He noted that the number of industry players and vessels has been increasing while port facilities have not been expanding at the same rate, causing berth congestion in some terminals, including the major ones.
“I think the key is to talk to like-minded carriers to share slots on bigger vessels… so that we reduce the number of ships needed at the port,” he stated.
He said this will mean economies of scale and reduced fixed costs, translating to more competitive freight rates, less congestion in major ports, and overall less carbon footprint.
Meanwhile, asked about the impact of the booming e-commerce industry on LSC’s volumes, Madamba said it is “currently marginal, and we want to greatly improve on that starting this year.”
For 2018, capital expenditure will be spent on upgrading vessels, dry-docking, and other hard assets such as land-based equipment. LSC also plans to invest in new technologies and systems to benefit its clients.
LSC is also continuously on the lookout for replacement of selected vessels every year, but always dependent on the availability in the world market of vessels with gears, said Madamba. He explained that since the general trend of new ship builds worldwide is toward gearless vessels, there are fewer ships with gears in the market. (Domestic carriers still use vessels with gears as many of the country’s secondary ports still lack the necessary equipment and facilities.)
Madamba said LSC has also been upgrading its system to digitalize its processes and hopes to provide soon some of the features offered by international shipping lines, such as tracking and tracing of shipments, and online booking, to enhance customer experience. LSC is still developing the system, he said, but added that they started trial runs of the online booking feature with select clients last year.
Madamba, who has 15 years of experience in the international shipping industry and seven years in domestic freight forwarding, logistics and warehousing, said he hopes to inject innovation and excitement into LSC to “help elevate the level of service that we can provide to our customers.”
As of December 2017, LSC has five vessels deployed to key ports in Manila, Visayas, and Mindanao. It also has various equipment and facilities for handling customers’ cargoes, including land-based equipment such as forklifts, top lifts and trucks, as well as container yards and warehouses at its branches and agencies across the Philippines. – Roumina Pablo
