From a plunge in global trade amid border closures during the first half of 2020 to a sharp revival in demand today – to the extent that ports are now facing congestion – much has changed in just a year.
One big difference is that there is more optimism than before.
This is the case for global port operator PSA International, whose portfolio includes its flagship terminals at the Port of Singapore. Last March (2020), Group Chief Executive Officer Tan Chong Meng said that PSA’s business was likely to be set back two to three years as a result of the outbreak. Today, he has revised the timeframe to just one or two years.
The reason for optimism: a faster-than-expected return of demand. Last year, PSA handled 86.6 million Twenty-foot Equivalent Units (TEUs) of containers at its port projects, a slight improvement of 1.7 per cent compared to a year ago. Throughput at its flagship PSA Singapore dipped by just 0.9 per cent to 36.6 million TEUs. Despite the disruption, overall volumes were not significantly affected.
“You can say that it was a combination of two very different quarters, but overall, we ended up about the same,” Mr Tan noted.
Global trade volumes had slowed down significantly in the second quarter as the pandemic peaked. With factories closed and hauliers unable to go about their business as normal, there were few goods that could be moved. Certain ports were paralysed as a result, although the Port of Singapore remained operational around the clock.
The rough patch was brief. From the following quarter, manufacturing activities and demand resumed, boosted by governments’ fiscal spending and consumption needs. Higher port activity followed.
“I still think that we will lose about a year to two because we did not get the growth accruable to 2020,” he said. “How we will perform in 2021 in terms of trade and volume is something we are still uncertain about. Until people have confidence that the economic recovery is on surer, more certain rails, the jury is still out.”
Mr Tan added that while there is demand for more cargo movement, the global supply chain is still not flowing at the same pace as before. “The physical aspects of operations – people driving trucks, people in ports – has not become normal. And it’s still not fully normal in many parts of the world.”
But the slowdown in pace is not stopping PSA from accelerating its own drive for change. It embarked its “reboot” a few years ago, starting with a digital push. Now it has identified its role in the industry, which is to be a “supply chain orchestrator”.
“Previously, logistics was a very fragmented industry. The concept of orchestration was quite impossible. But now, digital technology has allowed you to facilitate, even if we have not reached industry consensus on standards and systems, and it is still subject to mutual agreements. And then with COVID, we have seen more enduring concerns about sustainability in a post-pandemic world come up,” noted the co-Chair of the Emerging Stronger Task Force, which was set up to guide Singapore’s economic recovery from COVID-19.
“So we need to join up solutions. We’d like to go from someone who facilitates to someone who proposes the solutions for people to take up. We want to emphasise that there is a need to come together. It’s just like an orchestra and all of us will play a part together within the same solution space. We'd like to be a key player in that space.”
Q: You were leading six global businesses at the Royal Dutch Shell Group before joining PSA in 2011. How did that move come about?
Mr Tan: It’s not often that you move away from a career you’ve been in for 20 over years. But for both personal as well as professional reasons, it was the right time. We (my family and I) felt it was time for ourselves to establish ourselves within the country as opposed to being part of a global conglomerate. The family did not want to move to London. So this started a re-examination of what’s next and what else?
I also felt it was time to move from the oil and gas industry to something that was different and would also hopefully leverage my core skills – understanding customers’ structural needs, taking long-term investment decisions, and bringing along multiple stakeholders across different countries. This was what PSA needed.
It had, in the first 10 years of its corporate life, acquired positions in quite a number of global port locations, and there was this prospect of building a Singapore-born global company. So the ambition then was to see how PSA could become that global company, not just building on its assets but also its people. This was a challenge – I couldn’t pass it up. So now, 10 years later, we are here.
Q: How different of a crisis is COVID-19 compared to others you have seen?
Mr Tan: Many of the challenges that were faced by the industry in the past were driven by man-made triggers: China joining the global factory, the World Trade Organisation; the consolidation of shipping lines; and the upscaling and upsizing of ships. This means that the pace as well as the trajectory of those developments were things that were within our control. With COVID-19, you don’t know what you’re dealing with.
In the early part of last year, we had no impression it was going to be a pandemic-driven immobilisation of the supply chain. Within a few months, we were impacted, starting from Asia. But we also found, however, that the appreciation of the importance of supply chains rose very quickly. People still needed their supplies, their food, and lifestyles to carry on as normally as possible, even under lockdown. The resourcefulness of the industry to come together and ensure that critical supplies cross borders was something that I found very significant and precious in learning.
Q: What does resilience mean to you today?
Mr Tan: For many years, we saw logistics moving towards the low-cost commodity world, where customers said: “I want the lowest price. I can arbitrage production from one place to another, as long as there’s cheap and good connectivity.” What the pandemic taught us is that we cannot take this for granted.
The idea of just-in-time, cheap commodities, scale, and all those attributes of logistics that were desirable in the past needs to be complemented with better solutions now. Customers are starting to call for more reassurances. “Yes, I want that, but can you give me more certainty?”
In the last few years, especially with the introduction of digital capabilities, new tools have come into the marketplace to enable us to provide better solutions. It used to be that customers were not so concerned about reliability and resilience, which was that differentiation provided by a better operator versus a so-so operator. I think this pandemic puts a company like us – that has expanded beyond our ports through the years – in a good place to respond to customers’ needs. We are ready.
Q: What is the most urgent issue the maritime industry has to tackle today?
Mr Tan: There are many pressing problems. One of them is how to be sustainable as an industry. Because for an industry to be able to solve long-term challenges, it must start by being a healthy, sustainable industry itself. If you’re not sustainable as an industry, there’s no way you can be a positive participant.
In solving commercial issues, we must also solve the issue of becoming a sustainable player in supply chains. It’s about weighing the profits, principles, people – all must come together. I think that is the big challenge, especially as you are solving a combination of problems where sometimes they’re at odds with each other.
I do see the world coming together in agreement – more and more, and faster. It’s a lot more promising than in the past where sustainability came up only after all the other economics, societal, commercial issues were seen to first. Now there’s increasing agreement that we put sustainability as a common goal, and then try to solve the other issues accordingly. That’s a very big change. If we can get there with good global consensus through the rest of the year, even as the crisis rages, that will be a big plus for the community.