Grand China Logistics: Downturn lessons

Shanghai: Li Xiaoming cuts a slightly chastened figure when Maritime CEO catches up with him, tie loosened, eyes a bit baggy. As well he might. He is the ceo of arguably the most controversial shipowner during this protracted downturn, Grand China Logistics, a company that has racked up more days in court than OJ Simpson. Nevertheless, Li is adamant that his company has learnt the error of its ways, and prudence is now allegedly a watchword.

Prior to autumn 2008 Grand China Logistics was one of the most exciting companies in the shipping industry, coming from nowhere to be a major owner, charterer and shipbuilder in no time, comparable to Kang Duk-soo’s STX Group in Korea in many ways. Like Kang, come the downturn Grand China’s initial look as an emperor of shipping was found to be bare of substance. Court cases rapidly piled up against the company, a subsidiary of the HNA Group, a vast Chinese conglomerate that counts among its many holdings, Hainan Airlines, the nation’s largest private airline.

Still, Li says the experience has changed the company’s modus operandi profoundly.

The fleet for one thing is a shadow of its former self, down from 100 at its peak to 38 ships today. Moreover, the aim these days is to wean Grand China from its spot chartering past to a far greater focus on contracts of affreightment. Li says there are no plans at present to expand the fleet at the moment, or to launch new routes. The company is working on scrapping older ships.

“We know that the second hand and newbuilding prices are both low at present, however, we will not order the ships at the bottom of the market,” Li says.

“During the shipping industry downturn, we have learnt a lot,” Li admits. “We cannot control the balance of demand of supply, and it is too easy to expand blindly. But now, the business pattern of Grand China has changed fundamentally.”

It certainly has, with shipping slipping into the shade.

“Grand China is an integrated logistics operator, and shipping doesn’t account for much of our whole business,” Li says. “Considering the shipping industry will stay depressed for a long period, we have significantly shrunk our shipping business. The development direction of our company is to set up a modern integrated logistics business pattern based on e-commerce and information technology.”

The grand shipping ambitions seem to have been put on hold. Lawyers lament.  [24/05/13]

NEED TO KNOW:  Grand China Logistics

As one of the three pillar industries of HNA Group, Grand China Logistics launched operations in 2007. The major businesses are express delivery, equipment manufacturing and shipping. By end of 2012, the assets of the company stood at RMB65bn, with annual income of over RMB15bn and nearly 13,000 employees. Now with 38 ships the company moved 27.71m tons in bulk cargoes last year and 660,500 teu. Jinhai Heavy Industries, a top ten Chinese shipyard, is one its subsidiaries. 

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