Danish Shipping in the 21st Century: Navigating Troubled Waters (Palgrave Studies in Maritime Economics) 3030433234, 9783030433239

Table of contents :
Acknowledgments
Contents
List of Tables
1 Danish Shipping in the 21st Century
A Paradigmatic Shift
Danish Shipping Two Decades into the 21st Century
The 12 Newcomers in Danish Shipping
Baltnav
Celsius Shipping
Christiania Shipping
Evergas
Falcon Marine
Integrity Bulk
Navigare Capital
Navision Group
Nordic Bulk Carriers
Thorco Projects/Thorco Bulk
XO Shipping
Patterns of Innovation Among the Newcomers
References
2 Hafnia Tankers—Setting Out for the Long Run
Setting the Stage
A Decisive French Lunch
Tankers Inc.
The Path Towards Owned Vessels
Capital-Light Version
Fear of Being Left at the Platform
The Lauritzen Tankers Opportunity
Time Was at the Essence
Return to the Future
References
3 Norden: The Critical China Note
New Captain at the Helm
Long on History
The China Note
Not Typically Danish
A Cultural Revolution
Management Slim Down
Focus and Simplicity
Measure of Operator Performance
Legacy Cost
References
4 Maersk: Steering Clear of the Commodity Trap
The Guiding Star
Svendborg and Around the World
From Two to Four Legs
Stock and Shareholders
Facing Two Disruptions
A Self-Inflicted Vicious Circle
Assets as Liabilities
The Return of the Integrator
References
Conclusion
References
Glossary of Key Shipping Terms
Index

Citation preview

PALGRAVE STUDIES IN MARITIME ECONOMICS

Martin Jes Iversen Jesper Buhl

Danish Shipping in the 21st Century Navigating Troubled Waters

Palgrave Studies in Maritime Economics

Series Editors Hercules Haralambides Erasmus School of Economics Erasmus University Rotterdam Rotterdam, The Netherlands Elias Karakitsos EN Aviation & Shipping Research Ltd London, UK Stig Tenold Department of Economics NHH – Norwegian School of Economics Bergen, Norway

Palgrave Studies in Maritime Economics is a new, original and timely interdisciplinary series that seeks to be pivotal in nature and improve our understanding of the role of the maritime sector within port economics and global supply chain management, shipping finance, and maritime business and economic history. The maritime industry plays an increasingly important role in the changing world economy, and this new series offers an outlet for reviewing trends and developments over time as well as analysing how such changes are affecting trade, transport, the environment and financial markets. Each title in the series will communicate key research findings, shaping new approaches to maritime economics. The core audience will be academic, as well as policymakers, regulators and international maritime authorities and organisations. Individual titles will often be theoretically informed but will always be firmly evidence-based, seeking to link theory to policy outcomes and changing practices.

More information about this series at http://www.palgrave.com/gp/series/15187

Martin Jes Iversen · Jesper Buhl

Danish Shipping in the 21st Century Navigating Troubled Waters

Martin Jes Iversen Copenhagen Business School Frederiksberg, Denmark

Jesper Buhl Copenhagen Business School Frederiksberg, Denmark

ISSN 2662-6551 ISSN 2662-656X (electronic) Palgrave Studies in Maritime Economics ISBN 978-3-030-43323-9 ISBN 978-3-030-43324-6 (eBook) https://doi.org/10.1007/978-3-030-43324-6 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Acknowledgments

The book Danish Shipping in the 21st Century was written by Martin Jes Iversen and Jesper Buhl with administrative project support by Hanna Vagsheyg. The authors would like to thank the late Carsten Melchiors for his inspiration and enthusiasm and would also like to thank the Danish Maritime Fund for supporting the book project. Comments, input and access provided by the following are gratefully acknowledged: Henrik Sornn-Friese, Stig Tenold, René Taudal Poulsen, Peter Karlshøj, Nicolai Bro Jøhncke, Morten Aarup, Jan Rindbo, Mia Klausen, Mikael Skov, Morten Bo Christiansen, Christian Kjærgaard Winther, Mikkel Elbeck linnet, Thomas Lennerfors and Leos Müller.

v

Contents

1

1

Danish Shipping in the 21st Century

2

Hafnia Tankers—Setting Out for the Long Run

27

3

Norden: The Critical China Note

41

4

Maersk: Steering Clear of the Commodity Trap

53

Conclusion

67

Glossary of Key Shipping Terms

71

Index

75

vii

List of Tables

Table 1.1 Table 1.2 Table 1.3 Table 1.4

Operated tonnage, Denmark, year (2010–2019), million GT, position in the world World seaborne trade, 1970–2015 developed market economies, % of total Top 30, 2019, Danish shipping companies, owned/operated vessels, founding year, age Top 30, 1980, Danish shipping companies, owned vessels, founding year, age, 1000 DWT

4 6 7 8

ix

CHAPTER 1

Danish Shipping in the 21st Century

Abstract The structures and strategies of Danish shipping are changed by the turn of millennium. The second half of the twentieth century had been marked by the dominance of a few old shipping companies such as Maersk, JL, EAC, Torm and Norden founded in the second half of the nineteenth century. These companies continued to be important but after the year 2000 they changed the strategic course towards a focus on shipping activities at the expense of diversification and vertical integration (including ownership of shipyards). The old shipping companies were supplemented by a new group of companies which used three pathways to survive the challenging market circumstances of the 21st century: the asset light operation of dry bulk carriers, exploitation of the personal networks of experienced shipping people and finally the definition of financial and strategic niches. As a result of the dynamic mixture of old and new shipping companies, Danish shipping developed to become one of the worlds five largest operators of commercial vessels during the first two decades of the 21st century. Keywords Innovation · Cluster · Market entry · Opportune timing · Focus and diversification

© The Author(s) 2020 M. J. Iversen and J. Buhl, Danish Shipping in the 21st Century, Palgrave Studies in Maritime Economics, https://doi.org/10.1007/978-3-030-43324-6_1

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A Paradigmatic Shift The turn of the millennium marked a paradigmatic shift in the development of Danish shipping. Throughout the second half of the twentieth century, the stable and concentrated industry had been dominated by a relatively small number of very old shipowners. After the year 2000, a much more dynamic group of companies developed and the sector became marked by large, medium and small companies. In terms of shipping policy, the strong and consistent pressure for liberal trade conditions was changed to a more holistic view of improving the maritime cluster conditions including low taxes, strong education and innovative research. The concentrated industry structure in Danish shipping was historically deeply rooted. Three decades earlier, by 1960, about 80% of the Danish fleet was owned by the top ten largest shipping companies (Rasmussen et al. 2000). It was remarkable that seven of ten largest shipping companies anno 1960 were still to be found among the ten largest Danish shipping companies anno 1990 (Sornn-Friese et al. 2012; Tenold et al. 2012). Even by the late 1990s, Danish shipping was continuously dominated by these old dominant Danish shipping companies situated in Copenhagen: A.P. Møller/Maersk Line (1904), DFDS (1866), East Asiatic Company (1897), JL (1884), Norden (1871) and Torm (1889). The six old Danish companies were founded between 1866 and 1904 when the international shipping industry was revolutionized due to the introduction of steamships, telegraph connections and steel constructions. As emphasized by the economic historians Chris Freeman and Francesco Louca, regular steel ships powered by steam engines were one of the essential core inputs for new trade patterns later known as the first globalization (Freeman and Louca 2001). Danish shipping did not define or drive this development, but the political and economic transitions before 1914 provided the foundation for the development in the twentieth century. From the 1930s to the 1990s, the old Danish shipping followed a shared strategic growth pattern characterized by three features: vertical integration in terms of investments in shipyards, maritime suppliers training facilities and trading companies; horizontal diversification both in terms of related maritime activities such as liner shipping, oil tankers and passengers transportation along with bulk-based tramp activities; and thirdly unrelated diversification in terms of manufacturing activities including oil, gas and services. The prominence of vertically integrated shipping conglomerates was still present at the end of 1990s, and

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in the annual report from 1997 by the Danish Shipowners’ Association, it was stated that “… Danish shipping companies are not involved in the sea leg of the trade exclusively, … [they are] equally active in related areas, such as shipbuilding, offshore drilling, warehousing, storage, distribution logistics and the sale and purchase of ships” (Danish Shipowners’ Association 1997). The weak structural dynamic and the mentioned strategic growth patterns of the dominant Danish shipping companies residues to Alfred D. Chandlers distinct analysis of large manufacturing companies founded between 1880 and 1920, which thanks to diversification and internationalization proved to be able to dominate their respective industries throughout most of the twentieth century (Chandler 1990). Business historians have suggested that after the 1980s, corporate growth patterns have been characterized by a “post-chandlerian” development with increased outsourcing and focus on core competencies rather than vertical integration and economies of scope (Robertson and Verona 2006). In line with this research, the central argument of this book is that at the turn of the millennium, the traditional characteristics of Danish shipping were about to change fundamentally—in terms of both the structural dynamics (dominating large companies versus new dynamic and defining smaller companies) and the strategic dynamics (diversification and vertical integration versus outsourcing and focus). The background setting of the structural and strategic changes was an expanding merchant fleet in Denmark based on three important characteristics. Firstly, the expansion was based on three well-known segments (dry) bulk, (product) tankers and (container) liner shipping. That development was in a remarkable contrast to the development of other small traditional maritime nations such as Norway and the Netherlands in which specialized, capital-intensive niche segments became increasingly important including offshore, dredging and cruising. Secondly, the Danish fleet expansion was in particular based on customer-based business models centred around commercial operation rather than ship management or investor-based ownership as was very much the case for the fleet expansion in neighbouring Germany. As the maritime economist Henrik Sornn-Friese has illustrated, these specific competences in commercial operation resulted from a longer development back in particular from the 1950s to the 1970s when the maritime entrepreneurial operator H. Bang & Co. expanded internationally (Sornn-Friese 2020). We argue that the international breakthrough of the

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Danish competences came after the year 2000 due to a combination of new market opportunities (i.e. the breakthrough of Chinese trade), the new commercial strategies of some old shipping companies (in particular, the dry bulk operator Norden which became one of the world’s largest dry bulk operators between 2004 and 2007) and last but not least the appearance of a whole new cluster of small new geographically concentrated around the Tuborg Havn in Hellerup north of Copenhagen. In less than three years—from April 2015 to March 2018—nine new companies launched operations in this cluster only within the dry bulk cluster of Copenhagen: PGSC Shipping (2015); BW Dry Cargo (2015); Nordic Shipping Europe (2015); Trithorn Bulk/Thorco Bulk (2016); Navigare Capital Partners (2016); Fortuna Seaside Bulk Carriers (2016); Oldendorff Carriers Denmark (2017); Atlantic Chartering Service (2017); and Genco Shipping (2018). As a result, by the end of 2018, the number of dry bulk operators in Copenhagen for the first time exceeded 30 companies. Third, and finally, the Danish-operated fleet expansion after the year 2000 took place in uneven sequences based on a short but intense expansion from 2002 to 2008 followed by a relative stagnation when other shipping nations such as Singapore and Greece continued to grow, and finally a new expansion in operated fleet from 2016 to 2020. In four years, from 2015 to 2019, the operated tonnage of Danish shipping companies increased from 48.23 million GT in 2015 to 64.57 million GT in 2019, and in July 2019, the Danish media could thus report that Denmark was (again) among the world’s five largest shipping nations in terms of operated fleet (Mortensen 2019) (Table 1.1). The Danish shipping companies seemed to have been particularly strong in the utilization of the growing markets and at the same time able to respond quickly and flexibly to the declining shipping markets from 2013 to 2015. The Danish development of operated tonnage in the decade from 2010 to 2019 should thus be regarded in the context of Table 1.1 Operated tonnage, Denmark, year (2010–2019), million GT, position in the world Year GT World rank

2010 41.07 7

2012 62.52 4

2013 62.07 4

2014 56.38 7

2015 48.23 8

2016 53 8

2017 60.49 7

2018 62.88 6

2019 64.57 5

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the globalization patterns. Seaborne trade expanded rapidly congruently with merchandise trade from the late 1990s to the financial crisis in 2008. This fast expansion let to substantial investments in new tonnage, often delivered to the shipowners after 2012, which in combination with falling demand for transport led to distressed shipping markets in particular with dry bulk from 2009 to 2016. The Danish shipowners were thus able to adjust the operated fleet from 2013 to 2015 when the operated fleet was reduced from 62 million GT to 48 million GT, and the Danish position as operator fell from number four to number eight. Danish Shipping Two Decades into the 21st Century The geographic dimension of the merchant activities of Danish shipping companies was marked by two features at the turn of millennium. The first feature was that Danish shipping was truly global with more than 90% of the activities carried on in international cross-trades and only around 25% of these activities taking place in Europe. This global nature of the industry proved to be consistent for the early decades of the 21st century in contrast to the second feature namely that by the late 1990s, the US market was by far the most important for Danish shipping with more the 50% of the total revenue. The American dominance was a particular feature of the late 1990s when the East Asian markets experienced a severe financial crisis, Japan was in a period of economic stagnation, Europe was in a difficult transition period following the fall of communist regimes, while China was still relatively isolated in terms of trade and development. By late 1998, the US share of the total world trade reached 13% of total world exports and 16.5% of total world imports—these were the highest figures since, respectively, 1970 and 1987 (UNCTAD 1998). In a political and economic sense, the twentieth century had a remarkable unipolar culmination, which confirmed the famous notion of the twentieth century as the American Century or Pax Americana in line with the nineteenth century as Pax Britannica (Marchildon 1995). But as the British Empire lost its primacy in the early twentieth century, then the American dominance was also challenged in the first decades of the 21st century when China took over as the leading country in world trade. Table 1.2 shows that by 1970, almost 80% of all seaborne trade was unloaded in the developed market economies (Western Europe or North America), a figure that was still at 61.8% in 2000 but then fell dramatically to 35.3% in 2015. In terms of the importance of the developed economies peaked

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Table 1.2 World seaborne trade, 1970–2015 developed market economies, % of total

1970 1980 1990 2000 2010 2015

Goods loaded

Goods unloaded

29.7 37 43.8 41.3 34.1 34.9

79.1 70.5 67.3 61.8 43 35.3

Source UNCTAD (1998, 2002, 2012, 2017)

in the 1990s in terms of the combination between loaded and unloaded goods. Also, the structure of the Danish shipping companies was about to change at the course of the millennium. In 1997, there were 20 members in the Danish Shipowners’ Association, which accounted for more than 90% of the industry’s total turnover (Danish Shipowners’ Association 1997). In the late 1990s, the members—and thus Danish shipping— could be divided into three groups: the giant A. P. Møller (1904); the four traditional large companies Torm (1889), DFDS (1871), Norden (1871) and JL (1884); and then a mixed group of 12 other members including four industrial players with shipping interests (BP Gas Tankers, EAC, Elsam and Aalborg Portland), two North Atlantic shipping companies: Royal Arctic Line (1992) and Arctic Umiaq Line (1997) and a number of shipping companies, of which four disappeared in the following decade: Rederiet Knud I. Larsen (1942), Sønderborg Rederiaktieselskab (1958), Rederiet Erik Winther (1931) and Armada Shipping (1975). Two decades later, by 2019, Danish Shipping, as the association was now called, had 48 members (Danish Shipowners’ Association 2020). It was remarkable that the number of members in the association had been relatively stable from the early 1970s to the late 1990s, while the number more than doubled in the two decades following the turn of the millennium. The expanding number of members reflected a severe dynamic in the business structure of Danish shipping after the year 2000—a stark contrast to Danish shipping in the twentieth century which had been characterized by a stable business structure even during the market upheavals of the 1930s and 1970s (Tenold 2012). There are at least three important lessons to learn from Tables 1.3 and 1.4. First—and most important—is the remarkable growth of the individual Danish shipping companies. The increase reflected that by 2019

1

Table 1.3 Top 30, 2019, Danish shipping companies, owned/operated vessels, founding year, age

DANISH SHIPPING IN THE 21ST CENTURY

7

Name

Vessels

Founded

Age

Maersk Norden Ultramar Maersk Tankers Clipper Group Stena Bulk Torm JL DFDS Unifeeder Terntank Tankers Baltnav Esvagt Celsius Shipping Uni-tankers RN Holding XO Shipping Nordic Bulk T.K.B. Shipping Thorco Projects MOL Nord Tank Christiania Shipping Falcon Maritime Evergas Navigare Capital Partners WECO shipping (2017) Integrity Bulk Navision Team Tankers ID-Ships Total vessels, average age

697 339 185 160 150 102 74 73 50 50 48 47 43 42 37 40 45 25 25 22 20 19 17 15 15 15 14 13 9 9 2385

1904 1871 1960 1928 1972 1982 1889 1895 1866 1977 1968 2011 1981 2015 1995 1968 2010 2009 1977 2003 1992 2018 2009 2011 2017 1883 2014 2001 1958 1994

115 148 59 91 47 37 130 124 153 42 51 8 38 4 24 51 9 10 42 16 27 1 10 8 2 136 5 18 61 25 48

Source Various corporate homepages, authors

Danish shipping companies often focused on operating rather than owning the vessels. The fleet of Danish shipping companies grew fast by combining long- or short-term chartering of vessels with opportunistic commercial operation, and this strategic change is important in order to understand the growth around the turn of the millennium. The total number of cargo vessels owned or operated in Denmark increased from 419 in 1980 to around 2385 in 2019. The 1980 number only includes

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Table 1.4 Top 30, 1980, Danish shipping companies, owned vessels, founding year, age, 1000 DWT Name A. P. Møller EAC/ØK TORM Ove Skou Nordtramp/Norden J. Lauritzen DFDS Dansk Esso Mercandia Dannebrog Concord Line Knud I. Larsen Mortensen & Lange Blæsbjerg & Co. R. Stærke Kristensen Otto Danielsen Pepnautica Kosan Tankers C. Clausen Kgl. Grønlandske Handel Aalborg Portland Bentsen Line Wonsild & Søn Lehmann Jr. A. E. Sørensen W. Chr. Bech Rederi Hans Gørgerns Mohrship Thership A/S Progress Total vessels, average age

Vessels

Founded

Age

1000 DWT

112 26 7 14 5 18 25 5 19 14 2 17 25 5 3 11 11 16 7 7 6 5 10 5 10 8 8 5 11 2 419

1904 1897 1889 1935 1871 1895 1866 1889 1964 1883 1956 1951 1961 1965 1946 1944 1970 1962 1892 1774 1889 1973 1904 1950 1918 1862 1917 1973 1970 1904

76 83 91 45 109 85 114 91 16 97 24 29 19 15 34 36 10 18 88 206 91 7 76 30 62 118 63 7 10 76 61

5260 730 272 262 169 162 154 127 122 120 68 57 37 36 34 31 25 23 22 22 17 17 16 16 15 13 10 10 8 7

Source Danmarks Største Virksomheder (1981), Shipping Year Books (1981)

owned vessels while the 2019 includes the operated ships, still the change reflected that a number of globalized Danish shipping companies experience a dramatic growth in the decades at the turn of the millennium. In 2019, only one company—Maersk, the world’s largest container shipping company—operated 697 vessels, which was more vessels than the total of the Danish-owned vessels in 1980. Five other Danish shipping

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companies—Norden, Ultrabulk, Maersk Tankers, Clipper Group and STENA Bulk—controlled more than 100 vessels in 2019. It is worth noting that Norden only controlled five vessels in 1980. The second lesson to learn from Table 1.3 is the odd combination in Danish shipping between, on the one hand, a remarkable stability among a small number of very old companies and, on the other hand, a high turnover of the medium-sized companies between 1980 and 2019. It is remarkable that only five companies—Maersk, JL, DFDS, Norden and Torm—remained on the top 30 list between 1980 and 2019. These five companies were already among the oldest on the 1970 list, all founded before the First World War—that was between 1866 and 1904. This core of the oldest, most-established Danish shipping companies thus proved able to overcome the challenges of the 1980s and the 1990s and then explore the growth opportunities of the 2000s and 2010s. Consequently, the oldest companies were placed on five of the ten highest places on the 2019 list. It is on the other hand remarkable that all the other 25 Danish shipping companies on the 1980 list were either acquired, liquidated or simply unable to stay among the leading companies during the following decades. The third important point is illustrated in Fig. 1.1, and it concerns the feature of newcomers and thus of entrepreneurship and innovation in Danish shipping. It is remarkable that by 2019, nine of the 32 leading 16 14 12 10 8 6 4 2 0

1-10 years

11-75 years

2019

76+ years

1980

Fig. 1.1 Danish shipping companies, top 30, 1980 and 2019, age distribution

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shipping companies were new companies founded within the latest ten years that is between 2009 and 2019. The equivalent number in 1980 was only four, while on the other hand the proportion of very old companies (plus 76 years old) were higher than in 2019. The dynamics of Danish shipping in the 40 years from 1980 to 2020 illustrates Schumpeter’s perception of “creative destruction” in two ways: the destructive part was the disappearance of 25 of the 1980 top 30 companies in the following decades including four of the old, well-established companies EAC/ØK, Progress, Ove Skou and C. Clausen, plus all the relatively new and promising companies of the 1960s and 1970s. The creative part of the quotation was the nine companies on the list founded after the year 2000, which were able to consolidate themselves among the leading Danish shipping companies already by 2020. In the following section, we will focus on the development of the new shipping companies in order to unveil possible features of innovative among the newcomers in Danish shipping. The 12 Newcomers in Danish Shipping The 30 largest Danish shipping companies in 2019 could be divided into three groups: the global giant Maersk, which was several times larger than the other shipping companies in terms of turnover and tonnage, around 15 medium-sized international shipping companies founded before year 2000 and finally the 12 newcomers founded in the 21st century: 1. The giant: Maersk; 2. The 18 mid-sized companies (established before year 2000): Clipper Group, DFDS, Esvagt, ID-Ships, JL, Maersk Tankers, MOL Nord Tank, Norden, RN Holding, Stena Bulk, Team Tankers, Terntank Tankers, Torm, T.K.B. Shipping, Unifeeder, Uni-Tankers, Ultramar and WECO Shipping; 3. The 11 newcomers (significant shipping companies established in Denmark after the year 2000): Baltnav, Celsius Shipping, Christiania Shipping, Evergas, Falcon Maritime, Integrity Bulk, Navision, Navigare Capital, Nordic Bulk, Thorco Projects and XO Shipping. More than 30% of the largest Danish shipping companies were thus founded after the year 2000. In business studies, it has been established

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that innovation is a critical factor for the founding and survival of new companies. In the section below, the early development of the 11 Danish shipping companies founded after the year 2000 will be described followed by an analysis with a focus on the business models: What made these companies able to survive in difficult and changing market circumstance, and which role did entrepreneurship—defined as, respectively, networks, capabilities and creative responses—play to the newcomers? Baltnav Baltnav was established in January 2011 as a 50-50 joint venture between Navision Group (described below) and the Russian agro-industrial company Sodrugestvo. The Russian company traded soybean and rapeseeds combined with a wide-ranged logistics operations (Krigslund 2018). The name—Baltnav—indicated an ambition in the Baltic area but in the summer of 2016 the Russian partner was bought out of the company, which then was controlled by Peter Jein—owner of the Danish dry bulk operator Navision. In January 2015, Michael Bonderup became partner when he left the position as manager for the old Danish shipping company Torm’s dry bulk operations in Singapore, and in September 2017, Martin Sato joined as the third partner in Baltnav following 18 years with J. Lauritzen, where he also headed the Singapore office. When Baltnav opened its office in Singapore in September 2017, the company appointed two former shipping traders from J. Lauritzen as managers: Rasmus TakechiHansen and Anders Johansen. In the following interview, Michael Bonderup emphasized the importance of the personal network: “We did not just want an office in Singapore, … we saw a good opportunity to have Rasmus and Anders in Singapore. Because they have a unique network and could give Baltnav a lot of value” (Vogdrup-Schmidt 2017a). By 2019, Navision operated 47 dry-bulk vessels within three ship types— handysize, ultramax and supramax. More than 50% of the fleet was chartered for single voyages, while only a few were on longer charter contracts of a year or more (Pico 2019). Baltnav was thus an asset light dry bulk operator, which initially was formed on the basis of a joint venture with an important cargo customer and then later based its business model on the utilization of existing commercial networks of experienced Danish shipping traders within dry bulk.

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Celsius Shipping In 2012, Jeppe Jensen, former Managing Director of Maersk LNG, and his partner Andreas Povlsen decided to establish two related companies: Celsius Shipping in Monaco and Breakwater Capital in London. The purpose was to create an attractive platform for shipping investments on behalf of a selected group of international institutional investors. In 2014, when the operational set-up expanded, Jeppe Jensen decided to move the company to Copenhagen (Kristiansen 2014). The philosophy of the company was inspired by the Norwegian shipping-mogul John Frederiksen Frontline, as the company aimed for a small, highly skilled commercial management platform combined with the outsourcing of several functions including the technical operation of the vessels. The first major transaction took place within the product tanker segment in close collaboration with the private equity fund Oaktree and the Danish shipping company Torm and then followed orders of 18 chemical tanker ships in China in a joint venture with the Norwegian shipping company Odfjell Gas. In 2014, Celsius Shipping moved to Copenhagen in order to expand the operational management team. The investment in a serial fleet of 16 dry bulk ships of 64,000 DWT followed and from 2014 to 2019 eight small- to medium-sized container vessels between 2796 and 4100 TEU as well as 12 product tankers within the MR and LR2 segments. The largest investment followed in 2018 with the order of four LNG carriers to be delivered in 2020 and 2021. In total, Celsius Shipping had invested in 52 vessels from 2014 to 2019 making a total of 1.6 billion USD. This massive investment placed Celsius Shipping as the second-largest second-hand buyer in the world between 2016 and 2019. The less than ten-year-old company was by 2019 the ninth-largest shipowner in Scandinavia and the third largest in Denmark measured by million DWT (Jensen 2019). The remarkable growth of Celsius Shipping built upon a financial platform placed in the sphere between international private equity capital and the experienced management team from shipping represented by executive chairman Jeppe Jensen with more than ten-year management experiences in the segment of gas carriers; the Chief Operational Officer (COO) Niels Stig Christensen, former General Manager in Nordic Tankers; and finally the Chief Financial Officer (CFO) Morten Henriksen previous senior treasury manager in Torm. These experienced senior managers were all recruited from other Danish shipping companies, and they shared a professional background in the Maersk Group.

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Christiania Shipping Christiania Shipping originated from Nordic Tankers founded in 2010 when the Danish dry bulk shipping company Clipper divested all its tanker activities into this new stock-listed entity.1 In 2012, Nordic Tankers was acquired by the private equity company Triton, which in the same year acquired Herning Shipping founded in 1963. Nordic Tankers was managed by the Norwegian CEO Per Sylvester Jensen, who started in 2014 when Nordic Tankers operated around 100 vessels (Kristiansen 2018a). In the following period, a new subsidiary Crystal Nordic was established as a joint venture with Embarcadero (a joint venture between Borealis Maritime and the venture fund KKR) with focus on ice-classed specialized chemical tankers, but the subsidiary was sold already in January 2018 to John T. Essberger in Hamburg, a leading owner and operator of chemical tankers in Europe (Kojiam 2018). In the same year, the activities of the old Herning Shipping were sold to ANE Shipping of Norway A/S. By 2018, when Nordic Tankers only operated specialized chemical tankers, it was decided to rename the specialized shipping company. It is notable that the Norwegian owners decided to continue the operation from Copenhagen and from 1 April 2018, a new shipping company “Christiania Shipping” was established. Nineteen oil and chemical tankers between 3000 and 11,000 DWT were operated with a niche focus on the trade lanes between Europe and West Africa from the new headquarters at Amerika Kaj in Copenhagen, a few kilometres from Nordic Shipping in Hellerup. The Norwegian shipowner decided to place the new company in Copenhagen partly due to the attractiveness of the local maritime cluster and partly due to the Danish origin of the previous companies Nordic Tankers and Herning Shipping. Evergas The name Evergas was introduced in December 2011 when the French family holding company Jaccar Holdings acquired Eitzen Ethylene Carriers, a shipping company under the Norwegian Eitzen Group with roots back to 1883 (Kristiansen 2012). Evergas thus started on the basis of

1 The historical roots of Nordic Tankers date back to 1962 when Wonsild & Co. started their tanker business. 30 years this unit was transformed into Copenhagen Tankers in cooperation between Wonsild & Co., Clipper and Eitzen Group. In 2005, Clipper acquired all shares in Copenhagen Tankers, which was listed in 2010 under the name Nordic Tankers.

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an existing shipping company, with eight gas carriers. In the following years, the Copenhagen-based shipping company expanded its fleet for transportation and distribution of LNG, LPG and ethane commodities. Seven years later, Evergas owned and operated a fleet of 22 highly specialized vessels and employed more than 400 people offshore and in the three offices in, respectively, Copenhagen, Singapore and Shanghai. Evergas has a long-standing contractual engagement with the UK-based chemical and energy company Ineos. Based on long-term contracts between Evergas and Ineos, the Danish shipping company has been at the forefront in introducing new cost- and climate-efficient fuels and has benefitted from the shale gas revolution in the United States to open up new trade routes (Grønvald Raun 2018). Falcon Marine Falcon Maritime was founded in spring of 2009 by the—by then—48year-old Bo Knold Kristensen, former charterer at Lauritzen and from 1999 manager and co-owner of Atlas Shipping founded in 1997. Before the founding, Mr. Kristensen was involved in the technical development of a 35,000 DWT handysize bulk carrier in cooperation with the Danish company Grontmij Design Team headed by naval architect Michael H. Schmidt (Worldpress 2018). The Seahorse 35 was a characteristic novel vessel with a completely vertical bow, an advanced hull-form and an advanced engine system prepared for the 2020 IMO global sulphur limit. The first Seahorse 35 was ordered by Kristensen in the fall of 2008, and despite difficult market conditions following the financial crisis, then further 37 Seahorse 35 vessels were delivered in the following four years. Falcon Maritime Group was focused on dry bulk within the handysize segment and consisted of three subsidiaries: Falcon Maritime acted as the commercial operator, Falcon Navigation chartered most of the operated vessels while finally Falcon Rederi was the shipowning part. It was Falcon Rederi which contracted three Seahorse 35 vessels—of which one—“Formentera”—was sold already in March 2018. The core competence of Falcon Maritime was thus a combination of asset light dry bulk commercial operations combined with asset play opportunities based on novel innovative ship design in Falcon Rederi. The uneven balance between almost 29 operated vessels in the asset light Falcon Maritime and only three vessels in the asset playing Falcon Rederi was misleading in terms of the financial importance of the subsidiaries from 2009 to 2013. The initial years were all marked by difficult market circumstances in the dry bulk segment, and

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the company lost 21 million DKK in 2011 and 19 million DKK in 2012 (Vogdrup-Schmidt 2013). In 2013, the negative trend was reversed when the annual surplus was 3.2 million DKK and the equity rose from 2.7 to 36.1 million DKK thanks to asset play in Falcon Rederi (Carlsen 2014). The positive results continued in the following years, and by 2018, Falcon Maritime operated 29 vessels, while Falcon Rederi owned two Seahorse 35 vessels. Integrity Bulk Integrity Bulk was established in October 2014 by the 46-year-old Martin Egvang former Senior Vice President in Clipper together with four private investors. The months before the founding was interesting. Egvang allied himself with two former colleagues, Søren Hahnemann, whom he had worked with the shipping company Armada—the predecessor to Clipper—and Per Colberg, who still worked in Clipper. Four private investors were also from Martin Egvangs private network, and they were convinced by an asset light business model playing at two strings: firstly, a shortterm strategy of taking vessels on charters down to one trip when a cargo option appears in the market, and secondly to charter ships at longer terms—up to three years—in order to have the critical mass for larger cargo customers such as Glencore, ADM and Cargill. By 2018, Integrity Bulk operated 12 vessels on long-term charters from the office with 14 employees in the dry bulk cluster of Hellerup north of Copenhagen. Navigare Capital On 20 March 2017, the investment company Navigare Capital Partners was launched with an initial funding of 300 million USD. The new company was founded on the basis of three groups. The first group was two pension funds: PensionDanmark and Danica, which simply used Navigare Capital Partners as an option for an attractive return on investment. The second pillar consisted of an experienced management team with Managing Partner Henrik Ramskov former CEO of Thorco Shipping and COO in Maersk Tankers and partner Lars Bagge Christensen, former Managing Director in Norden plus the former manager of Nordea Bank John Boesen and Stig Enslev, who came from Maersk Brokers. The third pillar was members of the Mærsk family represented by Robert Mærsk Uggla grandson of Mærsk Mc-Kinney Møller and CEO of A. P. Møller Holding. Navigare Capital started as a project in Maersk Brokers, which is owned by the Maersk family, and it was decided to create an entirely new

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company in order to address the pension funds (Østergaard 2017). The Maersk name was presented on the webpage of Navigare Capital Partners as “Our Heritage and Commitment” with an explicit reference back to the founding of A. P. Møllers shipping initial company Dampskibsselskabet Svendborg. In the following two years, Navigare Capital invested in six container vessels, three dry bulk carriers, six product tankers and finally one LNG carrier. In October 2019, Navigare Capital raised its second fund with three pension funds—PensionDanmark, Danica and Lægernes Pension— amounting to 450 million USD. Navigare Capital Partners described itself as an “Alternative Investment Fund Manager” with extensive experience in shipping, acquisition, construction, asset management, financing and exit strategies. The investment horizon was around 10 years, and the company was governed and regulated by the Danish Financial Supervisory Authority. Navigare Capital Partners was thus based on the combination of financial insight and maritime expertise as the partners included wealthy pension funds and the Maersk family. Navision Group Navision Group was founded in 2001 by the experienced shipping trader Peter Jein with other partners as a commercial operator dry bulk, whom eventually were bought out by Jein. The company chartered one vessel and the timing was good and the Navision Group grew its business congruently with the dry bulk market (Vesterager 2012a). By 2007, the company operated a fleet of 45 ships, and in 2008, the financial result was 140 million DKK. In the aftermath of the financial crisis, the company was hit by a number of expensive counterparty crashes, and the still relatively new company lost 57 million DKK in 2011 and 12.5 million DKK in 2010. As a response to the crisis Navision focused at a specialization in particular segments including the transportation of grain and handysize vessels in the Atlantic area, and by 2018, the company commercially operated around 25 vessels. The main competences of Navision Group were the commercial network of the founder Peter Jein and the flexible asset light model, which made it possible to adjust fast to changing market conditions. Nordic Bulk Carriers In 2009, two young shipping partners—Christian Bonfils and Mads Boye Petersen—decided to found Nordic Bulk a new dry bulk carrier with focus

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on transportation with specialized ice class bulk carriers. During the winter, these vessels were used in the Northern hemisphere including North Norway and Canada. In spring of 2010, the two founders were looking for opportunities for employing the expensive ice-classified vessels, and at the same time, the Russian authorities opened for the opportunity of renting an icebreaker which could assist the vessel via the Northern Sea Route (NSR). Already in summer of 2010, Nordic Bulk Carriers shipped iron ore from Northern Norway to China across the Russian sea. This was a historic voyage as Nordic Bulk Carriers was the first non-Russian shipping company to open the new sea route, and thus save approximately 33% of the journey between Northern Europe and the Far East. Another journey was succeeded in 2011, but the real breakthrough for Nordic Bulk Carriers came in 2012. The Danish shipping company succeeded in completing nine NSR journeys during the summer, and the Danish shipping company decided to invest in the first two Ice Class 1A dry bulk carriers; hitherto, the Danish bulk carrier had chartered their vessels from other shipowners (Vesterager 2012b). The delivery of four more of these specialized ships followed from 2012 to 2016, and the young company was consequently able to position itself as a leading player in the arctic niche market. This position was furthered strengthened in 2013 when the 75,600 DWT Panamax Ice Class 1A vessel “Nordic Orion” passed the North West Passage North of Canada as the first commercial vessel with coal from Baffin Island to Finland (Tradewinds 2015). With the investment in the Ice Class 1A followed a majority ownership by the American partner Phoenix Bulk Carriers of 51% and in 2014 the two Danish founders decided to sell the entire company to the American partner, which was now part of the Pangea Logistics Solutions group. One of the founders Christian Bonfils decided to leave the company following a strategic disagreement already in January 2015 (Grønvald Raun 2015). Strategically, it was pivotal for Nordic Bulk Carriers when the parent company Pangaea Logistics Solutions in September 2015 won a contract of 30 voyages of Iron Ore from Canada to Europe via NWP, and two years later the Russian corporation Arctic Mining Company chose Nordic Bulk Carriers for the transport of coal from the Tayrmyr Island via the NSR to Europe (Vogdrup-Schmidt 2017b). Solid financial results followed as the revenue grew from app. 100 million USD in 2016 via 177 million USD in 2017 to 191 million USD in 2019 when the result was 6.1 million USD (Valeur 2019). The revenue in 2018 placed Nordic Bulk

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Carriers as number 11 on the top 30 list of Danish shipping companies based on revenues—the highest position of a Danish shipping company founded after 2000. This position mirrors the clear innovative feature of Nordic Bulk Carriers as a world-leading explorer of the opportunities for arctic shipping. Thorco Projects/Thorco Bulk Thorco Projects was founded in Svendborg in 2003 under the name Thorco Shipping. The background of the founding was that Clipper acquired the local shipping company T&C (Thor Chartering). Two young employees—Finn Spring and Thomas Mikkelsen—decided to leave the acquired company and instead establish a new shipping company in partnership with the wealthy Stadil-family (Grube 2010). Thomas Mikkelsen was only 25-year old when he became an old partner and CEO of the new company which was specialized in project shipping customized to individual transport requirements—a so-called MPP-fleet. Seven years later, by 2010, Thorco was the largest shipping company in Svendborg operating 34 vessels with departments in Singapore and Rio de Janeiro. Ten years after, the initial acquisition—in 2013—Thorco merged with Clipper Projects company and the HQs was moved to Copenhagen. The consequent fleet of 90 ships made it the second-largest company in the world within project shipping. In 2015, Clipper withdraws from the partnership due to strategic disagreements, and the ownership of the fleet was now transferred from Thorco Shipping to the parent company Thornico Group (Andersen 2017). In the following years, Thorco Shipping experienced financial difficulties, and the owners had to invest further capital in December 2016 when a loan of 250 million DKK was converted into share capital by the owners. In August of the same year, Thornico established a new shipping subsidiary, Thorco Bulk. It was managed by three Danish experienced shipping traders: Rene Mikkelsen, Marc Slinger and Uffe Hansen who had known each other since they grew up in the Northern Danish town Skagen, and all three came from the Norwegian company Western Bulk. The business model was asset light short chartering combined with flexible commercial operation as known from Integrity Bulk. The foundation was the existing network of customers combined with synergies with the sister company.

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XO Shipping XO Shipping was established in 2010 by the former manager of American-based Atlas Shipping Christian Levin. XO Shipping’s main strategy was to engage experience shipping traders as partners and thus utilities on their existing commercial networks. Key employees including Kim Pihl and Morten Hansen also came from Atlas Shipping. By April 2015, the shipping company operated 20 ships and had 18 employees in its HQs, when a severe fire damaged the offices. The situation was critical but XO Shipping got support from other maritime companies in the cluster in Hellerup, as they moved into the maritime company Vonsild across the street, and was thus able to re-establish the business shortly (Kristiansen 2015). The former manager of Norden’s dry bulk Panamax activities—Mikkel Fruergaard—followed as partner in December 2015 (Raun 2015). The partnership was further enlarged in January 2017 with Ejner Bonderup, former manager of the dry bulk division in Norden, achieved a 20% ownership in XO Shipping. Both Ejner Bonderup and Mikkel Fruergaard left XO Shipping after less than two years as partners. The asset light company was specialized on the chartering of dry bulk vessels on a short-term basis, with the following flexibility in the market. By 2018, XO shipping had 18 employees in its HQs in Hellerup, operating 25–30 vessels on average mainly across the Atlantic, serving approximately 75 customers (Kristiansen 2018b). Patterns of Innovation Among the Newcomers According to Eurostat, less than 50% of newly founded European companies survive the first five years of existence (Eurostat 2016). It follows that it is relevant to understand how and why surviving companies are able to navigate the first difficult challenges. Recent literature has suggested that various types of entrepreneurship are pivotal to this understanding, when entrepreneurship is regarded as a complex economic process rather than the traditional approach of exceptional individual action (Wadhwani and Lubinski 2017). Based on this line of thinking reasons, it is interesting why 11 newly founded Danish shipping companies were able to survive the difficult initial years. Below their development is analysed from three complementary perspectives: entrepreneurial capabilities, knowledge-based networks and creative responses:

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• What were the particular capabilities—for instance with regard to definition and exploitation of business models—of the new organization that survived and succeeded? (Gartner 1989); • Which were the networks and who were the actors facilitating entrepreneurship? (McClelland 1987); • To which extent is entrepreneurship the result of creative responses to contextual changes, regarded in contrast to existing practices in terms of adaptive responses (Schumpeter 1947). In relation to strategic capabilities, there are three important characteristics for the development and innovation of the 11 newcomers in Danish shipping. Firstly, the most widespread business model was the combination of asset light operations and a strategic focus on the dry bulk segment. The asset light strategy can be defined as a strategy in which the shipping company avoid ownership and technical operation of the vessels and instead focus on the commercial operation. This business model in combination with the dry bulk segment was the strategic foundation for five of the 11 newcomers: Baltnav, Falcon Marine, Integrity Bulk, Navision Group and XO Shipping. The asset light business model provided the five shipping companies with a relatively low barrier of entrance as the capital requirements were limited. The founders of the companies could basically register the company, announce their existence in the broker market and charter the necessary vessels. The most important capital requirements would be the necessary credit facilities, which ensured charters that the company could pay its bills including foreseen expenses. The asset light model provided the low entrance barriers but the essential competitive advantage for the five newcomers was actually the personal networks of experienced shipping people. The five new dry bulk companies all hired experienced shipping people from the older, well-established Danish dry bulk shipping companies including Norden (1871), J. Lauritzen (1895) and Clipper (1972). In the asset light business model, the licence to operated consisted of the international trustbased network based upon the personal relations between the experienced commercial charterer, the customers and the established shipowners (Raun 2015; Hartkopf-Mikkelsen 2016). The formation of new dry bulk operators in Copenhagen after the year 2000 was thus based on the established cluster consisting of old, well-established companies which provided the necessary access to the international dry bulk market including the critical personal relations.

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In the entrepreneurship literature, the concept of innovation has been defined as the core of a creative response to contextual changes (such as new technologies, markets or institutional settings) outside of existing practices (Schumpeter 1947). It is hard to identify any innovative features in the development of Baltnav, Integrity Bulk and XO Shipping while the founding of Falcon Marine in 2009 partly was based on the inventor and founder Bo Knold Kristensen’s development of the Seahorse 35 vessel with innovative features including an advanced hull-form, a completely vertical bow and an engine system prepared for the IMO 2020 sulphur limits (Vogdrup-Schmidt 2013). Kristensen’s invention was a classical example of technological innovation, but according to Schumpeter creative responses could also take the shape of novel response within other areas such as organizations, finance and marketing (Schumpeter 1947). Nordic Bulk Carriers focuses on the ice class including the very first commercial passage of the Northern Sea Route which was thus another but just as viable example of an innovative response to contextual changes including the changing climate and the Russian authorities willingness to navigate the waters on behalf of Western companies. Celsius Shipping and Navigare Capital were both based on the introduction of financial methods which were new to Danish shipping including the combination of old wealthy shipping dynasties (the Maersk family), institutional investors (pension funds) and experienced shipping people in the case of Navigare Capital and private equity (London based) combined with experienced shipping people (from Maersk) in the case of Celsius Shipping. It is characteristic that in both cases the strategy was “asset-heavy” based on long-term investment in the ownership of ships and at the same time widespread with investments in several segments including product tanker, dry bulk, container and the very expensive and advanced LNG vessels. This diversified strategy mirrors that the financial rather than the commercial capabilities were critical to these two new companies but the same time both companies were based on the personal networks of experienced shipping people such as Jeppe Jensen founder of Celsius Shipping with a background in Maersk LNG and Henrik Ramskov from Maersk Tankers and Lars Bagge Christensen from Norden. The two asset-heavy finance-based shipping companies were thus also based on the experienced network of formers managers from the Danish shipping companies such as Maersk Tankers (1928) and Norden (1871).

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The three last newcomers—Christiania Shipping, Evergas and Thorco Projects—were all characterized by the combination of two important features. Firstly, the exploitation of a particular niche in international shipping: chemical tankers on the trade between Europe and West Africa (Christiania Shipping); transportation of LNG, LPG and ethane commodities (Evergas); and specialized transportation (Thorco Projects). The definition of particular market niches was in all three cases combined with an internal continuation of long-term organizational and financial experiences. It is thus characteristic that the three niche players were newdefined “continuations” of existing companies. The roots of Christiania Tankers came from Nordic Tankers which dated back to 1962 when Wonsild & Co. started a tanker business and on the other hand Herning Shipping founded in 1963; Evergas came from Jaccar Holdings acquisition of Eitzen Ethylene Carriers, a subsidiary of the Norwegian Eitzen group which dates back to 1883; and finally, Thorco Project was built on competences from the Danish-Norwegian company T&C (Tønnevold & Clausen) from 1994 and based in Svendborg (Grube 2010). These five companies were based on the combination of international market niches with long-term organizational experiences. This pattern confirms the necessity of deeply rooted organizational and technological competences if companies aim to define and exploit global market niches. This necessity is known from the specialized German “mittelstand-companies”. The competitive advantage of these companies has been defined as the insistence on quality in production combined with the conservative approach to ownership and finance (Holz 2013). The five Danish shipping companies confirm that technological and commercial entrance barriers to international niches are high, and a way to trespass these barriers proved to be via acquisitions of long-existing and utilization of the personal networks. The 11 companies were all established after the year 2000, but the expertise of the founders and key employees came—in almost all cases—from the old, well-established Danish shipping companies such as Maersk, Norden, Torm, JL and Clipper.

References Andersen, O. (2017). Medie: Brud mellem Thorco og Clipper førte til retssag. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/Rederier/Toerlast/ article9422263.ece. Accessed 2 September 2018.

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Carlsen, C. (2014). Stærkt datterselskab trækker Falcon Maritime op. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ article6530796.ece. Accessed 1 September 2018. Chandler, A. D. 1990. Scale and Scope, the Dynamics of Industrial Capitalism. Cambridge: Belknap Press. Danish Shipowners’ Association. (Various years). Annual Reports. Eurostat. (2016). File: One, Three and Five-Year Survival Rates of Enterprises, Business Economy, 2016 (%).https://ec.europa.eu/eurostat/statisticsexplained/index.php?title=File:One,_three_and_five-year_survival_rates_of_ enterprises,_business_economy,_2016_(%25)_.png. Accessed 9 January 2020. Freeman, C., & Louca, F. (2001). As Time Goes By: From the Industrial Revolution to the Information Revolution. Oxford: Oxford University Press. Gartner, W. B. (1989). Who Is an Entrepreneur? Is the Wrong Question. Entrepreneurship: Theory and Practice, 13(3), 47–68. Grønvald Raun, K. (2015). Det handlede om at komme væk og lukke ned. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ article8129427.ece. Accessed 20 October 2019. Grønvald Raun, K. (2018). Evergas skal sejle gas på verdens største ethanskib. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/Rederier/Tanker/ article10045159.ece. Accessed 2 September 2018. Grube, O. (2010). Rederi vokser med raketfart. https://www.fyens.dk/ svendborg/Rederi-vokser-med-raketfart/artikel/1640323. Accessed 2 September 2018. Hartkopf-Mikkelsen, J. (2016). Da Clippers vicedirektør gik på jagt efter arbejdsglæden. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ Toerlast/article9188933.ece. Accessed 1 September 2018. Holz, M. (2013). Strategies and Policies to Support the Competitiveness of German Mittelstand Companies. In F. Coltorti, R. Resciniti, A. Tunisini, & R. Varaldo (Eds.), Mid-sized Manufacturing Companies: The New Driver of Italian Competitiveness (pp. 147–168). Milano: Springer. Jensen, J. (2019, September 23). Power Point presentation at CBS. Kojiam, N. (2018). Nordic Tankers, Embarcadero Maritime Sign JV Agreement. https://steelguru.com/logistic/nordic-tankers-embarcadero-maritimesign-jv-agreement/499050. Accessed 2 September 2018. Krigslund, N. (2018). Martin Sato bliver partner i Hellerup-operatør. https:// shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/Toerlast/ article9492399.ece. Accessed 2 September 2018. Kristiansen, T. (2012). Evergas støtter Lauritzens udspil om konsolidering. https://shippingwatch.dk/secure/Rederier/article3004649.ece. Accessed 1 September 2018.

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Kristiansen, T. (2014). Celsius Shipping satser på gas, kemikalie og tank. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ article6811676.ece. Accessed 18 October 2019. Kristiansen, T. (2015). XO Shipping raseret af storbrand i Hellerup. https:// shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/Toerlast/ article7664204.ece. Accessed 2 September 2018. Kristiansen, T. (2018a). Efter slankning af Nordic Tankers: “Hvad nu, Per Sylvester?”. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/ Rederier/Tanker/article10623241.ece. Accessed 2 September 2018. Kristiansen, T. (2018b). XO Shipping lander bedste resultat nogensinde. https:// shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/Toerlast/ article10386183.ece. Accessed 2 September 2018. Marchildon, G. (1995). From Pax Britannica to Pax Americana and Beyond. The Annals of the American Academy of Political and Social Science, 538(1), 151–168. McClelland, D. M. (1987). Characteristics of the Successful Entrepreneurs. The Journal of Creative Behaviour, 21(3), 219–233. Mortensen, C. A. (2019). Danmarks handelsflåde er nu verdens femtestørsteAarhus Havn er en del af forklaringen. https://jyllands-posten.dk/aarhus/ ECE11492800/Dansk-handelsfl%C3%A5de-er-nu-verdens-femtest%C3% B8rste-%E2%80%93-Aarhus-Havn-er-en-del-af-forklaringen/. Accessed 11 January 2020. Østergaard, N. (2017). Erfarne shipping-folk rejser 2 mia. kr. til ny investeringsfond. https://www.soefart.dk/article/view/386160/erfarne_shippingfolk_ rejser_2_mia_til_ny_investeringsfond. Accessed 19 October 2019. Pico, S. (2019). Baltnav i færd med at brede forretningen ud efter travlt 2018. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ Toerlast/article11422331.ece. Accessed 2 November 2019. Rasmussen, F. A., Rønne, B. V., & Johansen, H. C. (2000). Dansk Søfartshistorie, vol. 6: 1920–1960. Damp og diesel. Copenhagen: Gyldendal. Raun, K. G. (2015). XO Shipping henter tidligere Norden-chef. https:// shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/Toerlast/ article8260857.ece. Accessed 1 September 2018. Robertson, P. L., & Verona, G. (2006). Post-Chandlerian Firms: Technological Change and Firm Boundaries. Australian Economic History Review, 46(1), 70–79. Schumpeter, J. A. (1947). The Creative Response in Economic History. Journal of Economic History, 7 (2), 149–159. Sornn-Friese, H. (2020). Med lejede skibe og lånte laster: Historien om H. Bang & Co. og de danske timecharteroperatører. In A. R. Sørensen & J. Nevers, (Eds.), Søfartshistorier, Danmarkshistorien til søs (forthcoming). Copenhagen: Gads Forlag.

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Sornn-Friese, H., Taudal Poulsen, R., & Iversen, M. J. (2012). ‘Knowing the Ropes’: Capability Reconfiguration and the Restructuring of the Danish Shipping Industry. In S. Tenold, M. J. Iversen, & E. Lange (Eds.), Global Shipping in Small Nations—Nordic Experiences After 1960 (pp. 62–63). London: Palgrave Macmillan. Tenold, S. (2012). Boom, Crisis and Internationalized Revitalization: Norwegian Shipping. In S. Tenold, M. J. Iversen, & E. Lange (Eds.), Global Shipping in Small Nations—Nordic Experiences After 1960 (pp. 26–60). London: Palgrave Macmillan. Tradewinds. (2015). Nordic Bulk Carriers igen først. https://maritimedanmark. dk/?Id=27788. Accessed 20 October 2019. UNCTAD. (1998). Review of Maritime Transport 1998 (p. 3). UNCTAD/RTM(98)/1. UNCTAD. (Various years). Review of Maritime Transportation. Valeur, S. (2019). Nordic Bulk Carriers lander bedste resultat nogensinde. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ Toerlast/article11396453.ece. Accessed 20 October 2019. Vesterager, J. (2012a). Navision sidder på hænderne i sløvt marked. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ article4869035.ece. Accessed 1 September 2018. Vesterager, J. (2012b). Nordic Bulk Carriers tror på mere sejlads nord om Rusland. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ article4882803.ece. Accessed 20 October 2019. Vogdrup-Schmidt, L. (2013). Falcon Maritime Group ramt igen i 2012. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ article5538128.ece. Accessed 1 September 2018. Vogdrup-Schmidt, L. (2017a). Nordic Bulk Carriers får russisk kul-aftale. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/Rederier/Toerlast/ article9472981.ece. Accessed 20 October 2019. Vogdrup-Schmidt, L. (2017b). Brikkerne begynder at falde på plads hos Baltna. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/secure/Rederier/ Toerlast/article9941410.ece. Accessed 1 September 2018. Wadhwani, D., & Lubinski, C. (2017, Winter). Reinventing Entrepreneurial History. Business History Review, 91, 767–799. Worldpress. (2018). https://boknoldkristensen.wordpress.com/. Accessed 1 September 2018.

CHAPTER 2

Hafnia Tankers—Setting Out for the Long Run

Abstract The foundations for Hafnia Tankers were established in 2010 by three Danes seasoned in the product tanker business. They saw an opportune timing for an aggressive market entry for a new Danish-based product tanker company carrying gasoline, diesel, naphtha and other refined oil products from the current product hubs in the US Gulf and the Middle East to all regions of the world. Keywords Innovation · Cluster · Market entry · Opportune timing · Focus and diversification

In January 2019, the Danish start-up was merged with the wellestablished Singaporean company BW Tankers creating one of the world’s largest product tankers company. This new entity was headquartered in Singapore, and Hafnia Tanker is therefore not mentioned in the previous chapter concerning the 35 largest Danish shipping companies’ anno 2019. The story of Hafnia Tankers is nevertheless an important example of entrepreneurship in Danish shipping in the 21st century. By 2019, Hafnia had built up a fleet of 88 product tanker vessels and accumulated USD 2,3 Bn. in invested capital. This chapter is presented as a case with real-life examples of dilemmas and opportunities faced by the top management and the company.

© The Author(s) 2020 M. J. Iversen and J. Buhl, Danish Shipping in the 21st Century, Palgrave Studies in Maritime Economics, https://doi.org/10.1007/978-3-030-43324-6_2

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Setting the Stage Mikael Skov was in a thoughtful mood this autumn day in 2017 in Hellerup, north of Copenhagen, Denmark. By November 2017, Hafnia Tankers was a well-respected pure play product tanker company with 37 vessels at sea. The journey towards this position began in 2011 with three dedicated tanker professionals from the Danish tanker shipping cluster sharing the idea of building a new top tier shipping company that could ride the volatile waves of the shipping industry while plotting a course into the far future. Four years had passed where he, as the CEO, had had a lucky hand in transforming the tiny start-up shipping venture with grand ambitions, Tankers Inc., into the well-established pure play1 product tanker company Hafnia Tankers with a growing fleet of tankers at sea, massive amounts of capital committed and a positive annual cash flow. He found some satisfaction in the simple fact that Hafnia Tankers, despite being a newcomer to the market, had been adaptable and fortunate to find profitable commercial opportunities during the last four years unexpected ups and downs in the market and thereby provide a solid proof of the founders’ intention of creating a shipping company with a potential commercial lifetime of 100 years (Skov 2017). Yet, sitting in the new Hellerup office with a view of boats and seagulls and a vastly expanded Hafnia Tanker organization, his mind drifted in strategic directions on how to continue to develop the company and provide profitable returns. He knew that the company’s group of investors eagerly awaited the next expected move for Hafnia Tankers, namely a public stock-listing. This would allow the current group of investors to sell out some of their stock holdings by inviting new investors into the company. But Mikael Skov also knew that these new investors would intensively examine the current management and the plans they had in place for Hafnia Tankers in the longer term. A longer term where the global energy market could be fundamentally changing and where fossil fuels’ market share was threatened by the emergence of renewables. And how would this influence the longer-term

1 A Pure Play company is a company that is focused on only one industry of product. Pure play companies are interesting for focused investors who want to make very specific bets on products or industry segments. Law, J. (2014). Dictionary of Finance and Banking. Oxford: Oxford University Press.

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prospects of Hafnia Tankers. A company was founded by three experienced product tanker shipping Danes seeing an opportune timing for an aggressive market entry for a new Danish-based product tanker company carrying gasoline, diesel, naphtha and other refined oil products from the current product hubs in the US Gulf and the Middle East to all regions of the world. Hafnia Tankers had built up a fleet of 37 product tanker vessels and had more than 1 billion USD of committed capital and 75 million USD in total profits in the period from 2014 to 2016 (Hafnia Tankers 2017).

A Decisive French Lunch The road towards these facts and figures was kick-started at an informal lunch in 2013. That early summer morning in July 2013 had all the features of yet another relaxing day at the French Riviera for Mikael Skov and his family enjoying their summer holiday. Yet despite the soft sun, clear sky and tranquil seas, Mikael Skov, the Danish CEO of Tankers Inc., was slightly uneasy for what the rapidly approaching informal lunch meeting could turn into. True to nature in the shipping industry, Mikael Skov never really let go if his phone nor his tasks as a CEO and the informal lunch with a former business associate and his family was more business than pleasure. And it was exactly at this kind of informal setting at the restaurant Lido Plage in Nice that good or bad business dealings and commercial decisions-making were made in a very opportunistic shipping industry. The informal ways of the shipping industry were not new to Mikael Skov. As the CEO of the ambitious ship owning investment company Tankers Inc., Mikael Skov had two decades of experience from the product tanker industry culminating with an interim period as the CEO of one of the world’s largest product tanker shipowner and operator; Torm A/S. Torm was in 2013 the second-largest product tanker company in the globally renowned and gradually growing Copenhagen-centred tanker shipping cluster.2 The cluster of product tanker and chemical tanker companies was spearheaded by the major tanker company, Maersk Tankers—a 2 Measured in the amount of invested capital Torm was only surpassed by Maersk Tankers. In 2013, Torm’s invested capital was USD 1,8 Bn. Maersk Tankers invested capital was USD 2,3 Bn. (Møller-Mærsk 2013).

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company within the family owned shipping conglomerate Maersk, along with a range of other large product tanker companies such as D/S Norden, J. Lauritzen, Nordic Tankers and Eitzen Chemicals. Together with his partner, also a former Torm executive, Jan Mechlenburg, Mikael Skov and Tankers Inc. were backed by funds from the prestigious and picky London investment fund Barclays Natural Resource Investments and they were looking for prime investment targets. This hunt for vessel investments initiated in 2011 had put Mikael Skov on speed dial of all the serious as well as more dubious product tanker brokers in the industry. For now, the result of this asset hunt was meagre, and Mikael Skov felt that the brokers were starting to question whether Tankers Inc. were simply too risk-averse and not up for the challenge. Mikael Skov knew that he and his partners were up for the challenge of building a strong and lasting product tanker business. But he also, reluctantly, knew that being backed by an investment bank with increasingly strict capital requirements and growing risk-aversion could limit him compared to the common modus operandi in a shipping industry that lived and breathed for the next big deal and with a much less restrictive attitude to risk-taking. The lunch would focus on exactly this risk dilemma as it was with one of Mikael Skov’s old acquaintance, Gary Brocklesby, now in charge of Navig8, an aggressively investing tanker owner and operator with a less risk-averse approach to shipping investments. As the lunch progressed to coffee and the families and kids took off to enjoy the French Riviera, the conversation deviated from chit-chat to corporate concerns, specifically, to Navig8’s very bullish views on the product tanker market and the current favourable window of opportunity for Navig8 to derive risk willing investment capital from an Oslo stock-listing. As the talk progressed, a nagging feeling came to Mikael Skov. This is not good, he thought. We are by far more progressed in the development of a solid investment case compared to any other ambitious product tankers project. We already have vessels on the water within our partner pool company, Hafnia Management, and thereby daily contact to actual oil product freight customer as well as access to essential information on the market sentiment. We have investors and we have an entire organization in place and set for scaling-up. If other companies less advanced and less transparent can attract capital from the financial markets, then we can do it even better. But we must beat the other competitors in their rush for capital, because this window of opportunity will not last forever.

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He left that lunch at the French Riviera excited by the promising prospects of the available capital and slightly anxious and impatient to start up the process that would make sure that Tankers Inc. could leave the current platform as an investment project towards the goal of creating a long-lasting competitive ship owning company.

Tankers Inc. Tankers Inc. was formed in October 2010 by Mikael Skov and Jan Mechlenburg with an ambition to establish “a great shipping company” (Iversen et al. 2015) with focus on vessel ownership. At the same time, a consortium of Danish and Swedish production tanker companies established the product tanker pool management company, Hafnia Management, managed by CEO Anders Engholm, also a former Torm VP. Hafnia Management and Tankers Inc. had no ownership relation; however, the two companies operated side by side from shared offices in the Danish shipping hub in Hellerup, north of the capital Copenhagen. The immediate goal of Tankers Inc. was to establish a strategic direction for the company, find investor aligned with this strategy and build up an organization to be able to enter the market at the most opportune point in time. The strategic path chosen was a demanding climb towards a long-lasting ship owning company that would hopefully outlast this century (Skov 2017). This opted for great patience from a notorious bunch of energetic shipping people all eager for the next fixture and off to new deals without looking back.

The Path Towards Owned Vessels By the beginning of 2011, Tankers Inc. signed an agreement with the British Barclays Natural Resource Investments and Castel AS where the partners committed to a joint analysis of the product tanker market with the intention of a total non-disclosed capital investment of up to 355 million USD (Andersen 2012). The build-up of the organization and not least the close cooperation with Anders Engholm’s expanding product pool continued throughout 2011, as Mikael Skov, Jan Mechlenburg and yet another former Torm employee Thomas Andersen analysed the product tanker market for ripe opportunities and the optimal market entry point.

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They all agreed that timing a spot-on market entry at the exact bottom of a falling market curve was down to pure luck, and therefore, they placed their focus on medium-term analysis and a rigid eye on how to handle the downside risk from investment opportunities. Any additional upsides would only be icing on the cake, while unaccounted for downsides could be detrimental for a newcomer on the market. However, during the first months and well into the spring of 2011, the product tanker freight rates and assets prices started to climb, without Tankers Inc. had any vessels at sea and all vessel investment opportunities being proposed to them started to look out of the money. By the late summer of 2011, the European sovereign bond crisis and the Greek financial tragedy unfolded and left banks and institutional investor in a state of shock, including the British bank Barclays Plc. the owner of the private equity investment entity Barclays Natural Resources Investments. Barclays highlighted in their 2011 annual report that their most urgent priority had become to improve its return on equity, while not increasing leverage (Barclays 2012). A clear signal of increased risk aversion that was spreading like a wildfire to entire banking sector. The increased risk aversion from Tankers Inc.’s prime investor combined with a gradual recovery in freight rates and an increase in asset prices de factor shut the window for an early 2011 market entry for Mikael Skov and his growing Tankers Inc. team. From his floor-to-ceiling interior window office cubicle in Hellerup, Mikael Skov could do nothing but observe how this closed window-of-opportunity period continued well into the summer of 2012. And Tankers Inc. CEO could also see how the pool operation in Hafnia Management just outside this window enclosure, with their innovative net-earnings pool commissioning structure (Hafnia Tankers 2013b) attracting the attention of shipowners all over the world, was rapidly expanding the operated fleet and kept hiring new employees. All Mikael Skov had on show was an un-triggered option contract for potentially Chinese built product tankers with earliest possible delivery in 2014. But at Tankers Inc. the countless phone calls from hopeful sales and purchase brokers offering yet another vessel as a unique investment opportunity for vessels at sea were turned down after yet another thorough analysis with an un-shipping-like “No thanks, but thanks for the call”. Mikael Skov knew very well that the brokers interest in presenting new opportunities to his widely proclaimed ambitious product tanker project

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would not last forever. But he also knew that showing profits from the very first deal would be an essential proof to the risk-averse investors of the long-term plans for Tankers Inc. And this would require an alternative approach to the gung-ho shipping way of doing business. By fall 2012, the management team at Tankers Inc. felt that the tides started to change. The exchange traded future curves for freight rates continued to point down for the coming months, but Tankers Inc. supply and demand models, combined with indispensable industry insight collected for the last two decades, showed that the potential for regional imbalances leading to short-term rocketing freight rates was on the increase. The timing was right for triggering the new building options and the hunt for vessels in the markets needed to be intensified. But Barclays were not easily convinced. They wanted the solid signs of a curve correction to back up any analysis and experience based on positive sentiment and guts feelings of market improvement.

Capital-Light Version This reluctance left Tankers Inc. with no alternative but to engage in a discussion of prolongation of the new building options and look for less capital-intensive investments, while the freight rates were bottoming out and began to point upwards. Such a capital-light opportunity came about in the summer of 2012. An on-the-face-of-it unattractive time-charter contract of two Taiwanese-owned product tanker became attractive and in-the-money when Tankers Inc. ensured backing for slight changes in the chartering agreement that ensured better earnings prospects. Eager to show profits from this first deal, Tankers Inc. chose to forego a part of the potential million dollar upside to the deal by immediately after contractual deliver charter out one of the two vessels and instead lock-in a profit equivalent to Tankers Inc. fixed cost for the coming year (Skov 2017). This deal was instrumental for Tankers Inc. relation to their investors. It solidified that Tankers Inc. was willing to de-risk their commercial decisions to cater for the current low-risk investment sentiment, and at the same time, it demonstrated the Tankers Inc. teams’ creative ability to profit from alternative opportunities shunned by other market players.

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Fear of Being Left at the Platform Despite the significance of signing a profitable first deal, a two-vessel charter was not the magnitude Mikael Skov had envisaged of Tankers Inc. entry into the rapidly improving market for product tankers. The hunt for bargain vessels or creative solutions to seemingly unfavourable investment opportunities continued. But Barclays remained unconvinced of any further investment commitment and sticky asset prices for financial distressed second-hand vessel limited the Tankers Inc.’s options. By summer 2013, and countless rejected investment proposals later, Mikael Skov concluded that it was time for opening Tankers Inc. for new investors, before the current bull run in the market had run its course. The lunch at the Lido Plage in Nice with the bullish Gary Brocklesby of Navig8 underlined this conclusion. As Mikael Skov rushed back to Hellerup from the French Riviera and the pivotal lunch, his fear of being dragged down by risk-averse banker while running for a train about to set in motion became even more vivid in the Danish shipping man’s mind. All the Tankers Inc. attention should now be directed at triggering the prolonged and renegotiated new building options and searching for new investors willing to fund an aggressive and imminent market entry. From earlier meeting and preliminary interest during 2013, Mikael Skov knew that three alternative investment funds could be lined-up for inclusion in the major shareholder group and act as cornerstone investors in the larger private placement that was needed to attract alternative investors to secure capital for additional vessels and new building options. Furthermore, a potential new merger opportunity had emerged with the potential to add a fleet of regionally traded handysize and two LR1 vessels to Hafnia Tankers. And just three weeks before the first round of presentations for potential investors was about to start a new and unexpected opportunity came out of nowhere.

The Lauritzen Tankers Opportunity At the grandiose and luxurious headquarters of the privately held fundowned shipping conglomerate J. Lauritzen, at Sankt Annae Plads 28 in the old part of Copenhagen and literally within walking distance from Hafnia Tankers, the shipping conglomerate’s newly instated CEO Jan Kastrup-Nielsen, faced a tough decision.

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For years, J. Lauritzen had built up a diversified portfolio of shipping assets within the bulker, tanker and offshore segment, developing as well as utilizing the full range of the Danish shipping clusters within these three segments. But even though the company was diversified in activities, more than half of the total revenue was derived from dry bulker activities and this sector had faced strong headwinds too long. And as J. Lauritzen headed into the third quarter of the year, Jan Kastrup-Nielsen was about to realize yet another massive annual loss of 300–400 million USD (Lauritzen 2013). While being a diversified conglomerate with oil, gas, offshore and dry bulk shipping activities, the financial reality was that the massive losses in dry bulker could not at all be alleviated by solid profits in the tanker segments. By August 2013, Jan Kastrup-Nielsen reached the conclusion that the Lauritzen Tanker business, a fleet of 10 owned product tankers all managed in a commercial pool by Hafnia Management, was to be rapidly offloaded and sold to the highest bidder. “Nothing beats luck! And it is undoubtedly very lucky that these Lauritzen Tankers vessels are offered for sale right now and the fact J. Lauritzen is right around the corner”, was Mikael Skov thoughts at the time when one of the Danish tanker cluster participants wanted out. But the public sale also stirred mixed emotions at Hafnia Tankers. First of all, Hafnia Tankers viewed Lauritzen’s fire sale of the 10 Hafnia Management operated and well-known Danish product tankers as a strike of luck and a surprising well-timed new opportunity to take a giant leap into the currently hot product tanker market. But they also saw risks in this open-bid approach for offloading of 10 attractive vessels. The open-book approach left minimal room for any bilateral negotiation on the actual asset prices, where Hafnia Tankers might be able to use some of the leverage obtained from being Danish and a current business partner to J. Lauritzen. And without this leverage, Hafnia Tankers needed to match any asset price offered in the market as well as run the risk of having 10 current pool-vessel leave the Hafnia Management tanker pool. The two Danish business partners engaged in intensive dialogue and arrived by 30 September at a common ground providing an informal right-of-first-refusal to Hafnia Tankers and an untraditional extended four-week period to secure financing for the ten vessels as part of the planned capital market tour (Klausen 2017).

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Time Was at the Essence Mikael Skov knew that time was in short supply. The window for raising the needed capital from willing shipping investors was not going to be open forever, the new building options Hafnia Tankers had at hand needed to be declared or cancelled no later than November, and J. Lauritzen needed cash to bolster their rapidly depleted coffers. And 200 million US dollars needed to acquire the vessels options, and the loads of legal documents and commercial contracts should be in place before the end of October (Hafnia Tankers 2013a). What was to follow was an excruciation tour the force of the international shipping and financial hubs with 30 meetings crammed in five days and scattered around the globe with first stop in Santa Monica, California, followed by New York, London, Oslo, Helsinki and Copenhagen (Klausen 2017). The participants of the tour CEO Mikael Skov, Anders Egholm, the CEO of the pool management company Hafnia Management and Thomas Andersen, Hafnia Tankers CFO were armed with spreadsheets, power points and proprietary market analysis to persuade the international the capital markets players to open their funds for what was to be a fully transparent, non-leakage (Skov 2017)3 and premier pure play product tanker operator, Hafnia Tankers. The tour provided some reassurance of the investor interest in Hafnia Tankers but gave no promises for the actual amount of capital commitment. And even in the taxi driving from the last meeting towards the airport, the three-man team didn’t dare lowering their guards or celebrate prematurely. By the book closure on 23 October, the time for celebration had finally come. The private placement had been oversubscribed and reached 235 million USD, above the needed 200 million USD threshold, and the investor group had been expanded to 18 international investors. A signed merger with BTS Tanker Partners Limited and Hafnia Tankers was in place and combined with the Lauritzen Tankers vessels Hafnia Tankers owned fleet at sea was about to jump from 0 to 19 within a few months

3 The fully transparent and non-leakage organizational management and ownership structure of Hafnia is in contrast to the ownership and management model financial investors had been presented in the past, where service and management fee between ownership entities left room for cost leakage eroding any future profit potential from the offered investment company—Mikael Skov and Mia Klausen, October 2017.

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(Hafnia Tankers 2013a). Hafnia Tankers was formed and ready to trade in the product tanker market.

Return to the Future This was all well-known to Mikael Skov as he sat in his office in October 2017. He knew Hafnia Tankers had had good fortune and the ability to act swift at an opportune moment in the product tanker market (Skov and Klausen 2017). The strategy for market entry had been successful and the solidity of the company’s financial approach had weathered all kinds of distress and disruptions. But looking further into the horizon, the first four years and the achieved results were only the first pages in the story of a company steering for the next 100 years. Trends were emerging in the global energy market that darkened the outlook for fossil fuels. The growth potential for gasoline and particularly diesel was being eroded climate changes concerns and technological advances leading to aggressive advances for electrification of the energy sector. Even some of the traditionally most conservative and climate change denying energy mastodons were shifting foot and actively adapting to a new reality. And when the Shell CEO, Ben Van Beurden, in July 2017 announced that he intended to switch from a diesel car to a plug-in Mercedes, it reached global headlines (Shanklemann et al. 2017). At Hafnia Tankers, they knew their main industry knowledge and commercial expertise was within product tanker shipping. That had been the pure play storyline that convinced investors back in 2013 and that would be the basis for the coming stock-listing when the market eventually picked-up again. But Mikael Skov also saw Hafnia Tankers main commercial and operational competence was non-related to a specific sector. Hafnia Tankers core competence was as a provider of shipping services irrespective of the type of commodity transported. Hafnia Tankers’ success had without doubt been highly reliant on the well-functioning Danish shipping institutions supporting a growing shipping tanker shipping cluster, where international majors were setting up Copenhagen offices to tap into this specific knowledge pool. The exact same trend was also emerging in the dry bulk operator business. A business area where a range of large and smaller Danish dry bulk companies for years had excelled and spread out their activities all over the world. And just like in the tanker segment, international players had

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now begun to set up Copenhagen branches to be a part of the thriving Copenhagen dry bulk operator cluster (Vogdrup-Schmidt and Pico 2018). “It is all about attracting the best skilled persons from various areas”, and provide the employees with a solid platform for commercial and operational performance and provide investors an opportunity to invest in a transparent and non-leakage company. “Whether we transport kerosene, corn or coal doesn’t matter. The shipping principles are the same all over”. Having arrived at that conclusion left Mikael Skov with no choice but to come up with a briefing to the executive board as soon as possible that outlined the potential paths forward and into the next decades for Hafnia Tankers. Epilogue In 2018, the Singapore-based and family owned shipping conglomerate BW Group purchased a significant share of Hafnia Tankers stocks. In the fall of 2018, the Hafnia Tankers and BW Tankers initiated talks of a merger between the two entities (Grønvald 2018). In January 2019, the merger was finalized, and the two entities combined and operating under the brand of Hafnia with the world’s largest fleet within the medium-range product tanker segment. Mikael Skov remained the CEO of the newly merged company.

References Andersen, O. (2012). Tankers Inc Postpones Ambitious Newbuildings. Shippingwatch. https://shippingwatch.dk/Rederier/article3005996.ece. Accessed 6 January 2020. Barclays. (2012). Barclays Annual Report 2011. https://www.home.barclays/ content/dam/barclayspublic/docs/InvestorRelations/AnnualReports/ AR2011/barclays-plc-annual-report-2011.pdf. Accessed 6 January 2020. Grønvald, K. (2018). BW Group køber op og ejer nu knap halvdelen af Hafnia Tankers. Shippingwatch. https://shippingwatch-dk.esc-web.lib.cbs.dk:8443/ Rederier/Tanker/article10741939.ece. Accessed 6 January 2020. Hafnia Tankers. (2013a). Hafnia Tankers Press Release 23 October 2013. Hafnia Tankers. (2013b). Hafnia Tankers Investor Presentation Equity Private Placement, 17 October 2013, Slide 47. Hafnia Tankers. (2017). Hafnia Tankers, Second Quarter Financial Report 2017 and Fleet List of Owned Vessels as of November 2017. Iversen,M. J., Nielsen, P. T. A., & Pretzmann, L. (2015). Ownership, Finance and Strategy in the Segment of Product Tankers—A Business Historical Analysis. Frederiksberg: CBS Maritime.

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Klausen, M. (2017). Mail correspondence with Mia Klausen, Hafnia Tankers. Lauritzen, J. (2013). Second Quarter Financial Report 2013. Møller-Mærsk, A. P. (2013). Group Annual Reports 2013. https://investor. maersk.com/static-files/ecf068bc-7c03-401f-a0c1-1f9be0793284. Accessed 6 January 2020. Shanklemann et al. (2017). Shell CEO van Beurden Says His Next Car Will Be Electric. Bloomberg News. https://www.bloomberg.com/news/ articles/2017-07-27/shell-ceo-van-beurden-says-his-next-car-will-be-electric. Accessed 6 January 2020. Skov. M. (2017). Hafnia Tankers, Interview conducted 28 August 2017. Skov, M., & Klausen, M. (2017). Hafnia Tankers, Interview conducted 18 October 2017. Vogdrup-Schmidt, & Pico (2018). Tørlastselskaber åbner kontorer på stribe i København. Shippingwatch. https://shippingwatch.dk/secure/Rederier/ Toerlast/article10519432.ece. Accessed 6 January 2020.

CHAPTER 3

Norden: The Critical China Note

Abstract The Danish shipping company D/S Norden is one of the “four sisters” in Danish shipping. The four large and old Danish shipping companies DFDS, J. Lauritzen, D/S Norden (shortened to Norden throughout the chapter) and Torm were all founded more than a century ago, respectively, in 1866, 1895, 1871 and 1889. Norden is thus a wellestablished company specialized in dry bulk shipping—but also with a product tanker department—with a long history of the commercial operation of owned and chartered vessels. This is the legacy the new CEO inherits in 2015 at what is perceived as the onset of a fundamental market shift. His perception is that having a long list of owned vessels in an increasingly volatile and uncertain dry bulk market is less valuable going forward and embarks on a strategic journey to turn the century-old company into troublesome waters. This chapter is presented as a case study with real-life examples of dilemmas and opportunities faced by the top management and the company. Keywords Market changes · Strategic changes · Asset light · Cultural changes · Performance measurement

© The Author(s) 2020 M. J. Iversen and J. Buhl, Danish Shipping in the 21st Century, Palgrave Studies in Maritime Economics, https://doi.org/10.1007/978-3-030-43324-6_3

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New Captain at the Helm The interior of the C-suite office was left almost untouched. Dark wood and classic maritime décor in the old-school top-floor corner office was what he had inherited by his predecessor. The new CEO of Norden, Jan Rindbo, had other tasks at hand before any renovation was top priority. And he was only weeks into his new appointment before he realizes that the non-interior-related tasks were huge. In May 2015, he had been given the opportunity to hold the highest rank at the renowned Danish shipping company and he was to replace a long-serving and charismatic CEO, Carsten Mortensen, that had decided to leave the Danish dry bulk and tanker shipping company (Norden 2014a). The departure came right at the time when Norden and all other dry bulk companies needed to face the mounting uncertainty and sharp declines in freight rates and vessels values that had followed a decade of ridiculously high earnings during the 2003 to 2010 period. A thorough recruitment process followed Norden’s announced loss of the esteemed leader in the spring of 2014, and by the fall, Jan Rindbo was appointed and to be installed by the early summer 2015 (Norden 2015). And the new CEO, Jan Rindbo, knew very well the good fortunes the Danish shipping company had seen during the boom period at the turn of the millennium. And he knew that Norden was long on capital committed to the dry bulker sector.

Long on History In fact, Norden was a company long on history as well. The family fundowned and publicly traded Danish listed company, as was the current version of Norden, was established by the founding father Mads Christian Holm in 1871 with owned vessels engaged in worldwide tramp operation. Acquisitions and loss of vessels are the historical highlights throughout the first 100 years of Norden’s existence, and by the early 1990s, Norden reaches several milestones on vessels and fleet size and by opening a branch office in the booming Asian shipping hub of Singapore. In 1997, Norden appointed a new head of the dry bulk department. In came Carsten Mortensen, a Maersk-trained shipping executive with a drive to shift the Danish shipping company active in international trading into a truly global shipping company.

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From 2000 to 2011, Norden’s rapidly expanding activities within primarily dry bulk vessel ownership and commercial operation had generated a total net result of close to 3 billion USD and added assets of 2 billion USD.1 During that same period, the shipping company had been on a roller coaster of a dry bulk ride. Chinese demand for iron ore, coal, steel, minerals and soybeans had taken giants steps and left the dry bulk sector in short supply leading to freight rates reaching for the sky. Norden grew from a minor company having 31 employees at one office in Copenhagen and a branch in Singapore controlling a fleet of 20 vessels to a titan international shipping player with 10 times the number of employees and vessels all operated from multiple offices around the world. However, by 2011 things started to sour for Norden and their CEO Carsten Mortensen. The freight rate tides had turned as the strength of the Chinese steam engine was slowing down and profitable investments and decisions were hard to find. From 2012 to 2015, Norden amassed a total net loss of 1 billion USD and there was no relief or return of decent freight rates in sight (Norden 2014b).2 This was the facts Jan Rindbo knew very well the first day he entered Norden pompous and carefully renovated headquarters at what had been a famous Danish brewery site left for squatters and street artist and since returned to corporate life by the previous CEO Carsten Mortensen with his leadership and corporate agenda inspired by the conservative and hugely successful Danish-owned shipping conglomerate Maersk. But the newly instated CEO was to realize that digging into the spreadsheets, strategy papers and corporate reports wouldn’t get him to know the real inside of what was Norden (Rindbo 2018). He needed to know the culture at Norden, the employees and the experience the overarching top-down approach to commercial decisions that had proved successful to the point of extraordinary within the tight-knit Danish shipping cluster. Within weeks after his first day as CEO Jan Rindbo realized that this extraordinary position of Norden had a flip side, the flip side of the massive accumulation of wealth was an extraordinary long-term exposure to the continued extrapolation of past years good fortunes for dry bulkers

1 Accumulation of net result and asset value based on various D/S Norden published annual reports. 2 Accumulation based on various D/S Norden published annual reports.

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driven by excessive Chinese demand for dry bulk commodities to build up infrastructure from scratch.

The China Note And at his desk, he flipped through an internal research note outlining a future that envisages that things would not continue a steady upwards slope as they had during the last ten years. The China Note included some of the reason for extraordinary demand growth observed during the 2000–2015 period (Aarup and Jöhncke 2018). Chinese steel production rose by 540%, from 153mt in 2001 to 823mt in 2014, while the related Chinese iron ore import increased by 840% or 822mt (Howe Robinson 2015). These figures are converted into annual growth rates of 12 and 15%. This cargo boom period coincided with a historical shortage of shipbuilding capacity leading to examples of extraordinary four to five years from contract signature to actual delivery, double the average time for delivery in past years. Freights rates had skyrocketed in the 2003–2010 boom period with the Baltic Dry Index, a proxy rate indicator for all dry bulker segment, reaching close to 12.000. A striking 1000% above the long-term average of 1.289 calculated when excluding the boom period as an outliner in the long-term dataset. Having established that this period was extraordinary in many aspects, the China Note turned to the future and pondered that an extrapolation of past trends is not a good guide going forward. China would without doubt remain the major driver for dry bulk demand in the future. But Chinese growth rates were on the decline with an economy and political establishment shifting focus from export-driven growth to consumption-driven growth (Mano and Zhang 2018). These signs were already showing in declining growth rates for the vital steel production sector and their demand for iron ore and heading towards the 5% mark. An indication that China was on a road taken by other developing countries, where the relation between growth in steel production and general economic growth would fall below GDP growth. By 2015, Chinese GDP growth was 6.9% and down from the double-digit rates seen in the 2000–2010 period. If China was to go down that road, the Chinese economy and the role of China in dry bulk shipping that Jan Rindbo knew from the inside were about to change. Jan Rindbo was in fact a product of rising role of

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China in dry bulk shipping. Since the late 1990s Jan Rindbo had gradually stepped the shipping ladder outside the Danish shipping cluster with tenures in the United States followed by permanent positions in Hong Kong, China. He had been the right hand of his compatriot Klaus Nyborg, the CEO of the major Asian dry bulker owner Pacific Basin, before Klaus Nyborg left for early retirement and board positions. As chairman of the Board at Norden, Klaus Nyborg was in the spring of 2015 reunited with his protégé Jan Rindbo, after a short period of being the interim CEO as well as a board member. Jan Rindbo was definitely not new to China, and not new to the turbulent business of bulk shipping nor new to the chairman, when he was instated as CEO. But he was rather new to Denmark and the Danish way of company culture and as a Danish way of leadership—a way of low degrees of power distances and a high degree of questioning authorities (Hofstede Insights 2019).

Not Typically Danish Norden was however not very typically Danish in its leadership and organization. During the reign of Carsten Mortensen, the Maersk spirit of a relentless work ethics as well as a high degree of organizational hierarchy had guided the corporate culture—a corporate culture that stood out from mainstream Danish companies where frank and open discussions between employees and directors and high degree of delegated responsibility were common denominators. Well-timed market calls from the top floor were the backbone of the breath-taking earnings experienced in the boom period. This was the CEO and company Jan Rindbo were to succeed and succeed with by returning the bottom line to black figures. This goal was carved in stone but the path to get there was less clear as more of the same was not an option. He did, however, not like the thought of taking a huge position on red or black in a world that is very hard to predict any longer than 12 months ahead. In Jan Rindbo’s world, uncertainties were on the rise (Rindbo 2018). Changes were happening at a much faster speed than in the past with technological advances and digitalization paving the way and with a growing risk of political interference affecting market factors. Under these market conditions, a long-term plan had slim chances for success and companies needed to be able to adapt and adopt instantly.

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The strategic direction and plans should be adjustable as markets kept moving and changing and then using three-year plans as a guide did not make much sense (Kristiansen 2015). Therefore, he saw a different kind of Norden going forward.

A Cultural Revolution A mantra of transparency and openness was the guiding leadership principle. A principle turned to action by one-on-one interview with all the executives at Norden and when Jan Rindbo, armed with a flipchart, walked through the office aisles of the headquarter and at offshore offices and listed more than talked to everybody that had a view to share. After having walked and talked and listened for weeks, he realized that what he was about to start was somewhat of a cultural revolution. The question, he had been most eager to ask Norden’s employee, was also the hardest question for them to provide a fulfilling answer to. Where did they see Norden’s most valuable trades, customers and competences that set Norden apart from the rest of the dry bulker competitors? What he himself had found during his tour-the-office was that although Norden’s financial and operational competence and performance compared to their peers remained stellar in most segments, there was potential for even better results. The potential he spotted was in the day-to-day decision-making. Past years authoritarian leadership and calls from the top had been successful, but at the same time hampered desire and incentive to take short-term calls further down in the organization. It was at the chartering desks and not at the top office that Jan Rindbo saw the real value generation as the global tides were shifting into more uncertain territory. The organization needed to be adaptable to change and less fixated on executive guided decisions. The charterers observed and digested what happened in the turbulent spot market every minute of the day. They had much better insights and first-hand knowledge than any executive on the floors above, and the charterers were the ones that should do the day-to-day commercial execution. Jan Rindbo wanted to unleash this potential. He wanted to set them free to play the game at their best. The first major step he took in that direction was cutting down the number of executives in the executive management, where the strategic decision was discussed (Norden 2015).

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Management Slim Down Four executive directors and the CEO in the past had responsibility for the activities covering finance, dry bulk, tanker and corporate functions. This group of executives was trimmed down to three persons only leading to departure of the two long-serving Norden Executives Lars Bagge Christensen and Michael Tønnes Jørgensen. The aim was clear. A slimmed executive management needs to put areas of responsibility downwards in the organization. Down towards the competent resources with the untapped potential Jan Rindbo had spotted during his walking and talking tours. This was the first step in what turned into a strategic process that should set the direction for Norden’s modus operandi for the uncertain future. This strategic process was to uncover where Norden’s competitive advantages were most striking and thereby how Norden could make the most of its people and positions.

Focus and Simplicity While the first step in this direction meant a farewell to loyal and competent executives, the second step and the first official step of the new direction “Focus and Simplicity” meant a farewell to the largest vessels in the fleet. The strategic process in 2015 had confirmed Jan Rindbo in the view that going forward and into more volatile markets the bulk of earnings would be generated at the chartering desks and by top-floor market calls. This however required that Norden’s activities and scope were within sector where the actual work done at Norden’s current chartering desks would stand a chance of influencing the earnings. A rundown of Norden’s dry bulk activities showed that the shipping company had vessels and exposure in all of the major trade segments. All the way from the smallest handysize vessels operating in worldwide tramp operation with a range of produce destined for thousands of ports and up to the large capsize vessels that primarily sailed from Brazil to China with iron ore or coal. The large capesize vessel had in the past earned the highest freight rates. Without much need for unique knowledge of the shipping operations, the capsizes had benefitted from their economies of scale minimizing the unit cost for transport and produce while the unsaturated Chinese

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consumption of raw material to build out infrastructure and secure power for the booming economy had secured vessel demand. But as the Chinese economic boom showed signs of slowdown and demand change, the capsize vessels were also the most at risk. And the sheer size and draft of these large vessels limited the options for engagement elsewhere in the world. The potential for utilizing Norden shipping competences and maximize earnings on owned vessels were more present in the vessel segments and trade below the capesize vessels and particularly in the supramax and panamax. These segments required an extensive market knowledge, a global and local market presence and a good reputation (Norden 2015). The flip side of this insight was that Norden needed another trimming of the existing structure and organization. The three capesize vessels and eight post-panamax vessels in the core fleet were no longer in flavour and to be sold at an opportune timing. And the organization dedicated to these ‘’vessels would focus their attention elsewhere.

Measure of Operator Performance The work towards the “Focus and Simplicity” strategy, the market research, the digging into the organizational structure and the disclosure of Norden’s unleashed potential also revealed that it was hard to truly measure Norden’s commercial operational performance (Aarup and Jöhncke 2018). In the past earning and profits from the already contracted and owned vessel, the long-term contracts books and the spot operation focus on deriving a margin from current and potential positions in the actual shipping market. The earnings from these past and future decision, whether short or long in their risk exposure, were all entangled and scattered to a degree where no one knew for certain who made what and how. If Jan Rindbo was to succeed in really delegating the commercial responsibility down in the organization, he needed to find a way to enhance the transparency of where the actual profit was made. He needed to ensure that past years commercial decisions, whether profitable or not, did not blur the results of the commercial decisions taken from now on. The slate needed to be wiped clean. A clean slate with no dragging legacy would motivate and spur a different mentality. A mentality inspired by commodity trader’s appetite for engaging in new businesses and fed by the inherent competitiveness between Norden’s charterers.

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To achieve this, new internal reporting structures were needed to make sure that every trader could see how their work contributed to Norden’s earnings.

Legacy Cost Norden’s dry bulk activities were split into an owner and an operator department. The owner part was responsible for maximizing the value generation from the long-term vessel and cargo positions that had been decided upon years ago and to some limited degree also engage in new long-term positions. The operator part was split into nine geographically profit centres that replaced the old and less segmented structure in the dry bulk operator business. And the operator was to derive value from the day-to-day operation and therefore the centre of Norden’s new strategy. Every operational profit centre was to operate as an independent company within the Norden organization. Each profit centre should act as a flexible entrepreneur in the market while benefitting from a corporate structure and the economies of scale of being part of a large corporation. Autonomy within a clearly defined frame for risk and rewards was how the charters were to play and use all their abilities to trade vessels and cargoes from their desks in a global marketplace. This level of autonomy did not require new skills. But it required a new mindset and a willingness from everyone to take greater responsibility at the desk and not wait for orders and directions from above. The flip side of autonomy was less leadership involvement for Jan Rindbo in the day-to-day operation. Just another task delegated away, some CEOs might think and see it as a blessing, while others, especially leaders that had been a part of the daily chartering decisions for many years, could struggle to steer away from (Rindbo 2018). This cascading of capabilities is spurred by the perception that the latest actual insights on the changes in a turbulent market are obtained and gathered at the front desks and will not necessarily, in a flat and autonomy operating organization, find its way further up the organizations steps and all the way to the previously top decisions-making floor. Jan Rindbo knew that the task of giving up on control on information and some strategic decisions could be perceived by some as a loss of power. Yet he saw far greater benefits from delegating a wider range of commercial decisions down to the desks.

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“In an agile business and a constantly changing world, I would never be able to see the same market signals, as they are exposed to”, says Jan Rindbo. During his tenure as CEO, Norden has expanded the range of worldwide offices and now having an expanded range of chartering desks in Copenhagen, Singapore, Santiago de Chile, Mumbai, Vancouver, Melbourne, Shanghai and Annapolis, United States. “The charterer at these desks are the once on the market every single minute. They have insights to take action in the market”. “Our challenge has been that in the past years these charterers have waited for execution orders from the top floors. We have flipped that around and told them that they are the ones that know what to do”. At the same time, new information infrastructure on the very latest chartering decisions throughout the Norden organization had been implemented and provides Jan Rindbo with all the data he can possibly comprehend. Hence, the challenge is not a lack of data. It is the opposite. The limitless number of data and information available to any interested and authorized person. Data are constantly updated, revised and reconfigured in turbulent market conditions providing more of a blur than clarity. Jan Rindbo’s chosen path through the blur is delegation and clearly defined roles and responsibility. This will be the guiding star for realizing top and bottom line growth in an uncertain future. This chosen strategic path for the daily operation and company growth has neither an expiration date attached to it nor a clearly defined end goal. And Norden’s CEO is reluctant to call this guiding star an actual strategic plan. “I don’t really believe in strategy plans. This plan will be adjusted all this time and therefore it is hard to say when the end date is”. “We would like the dry bulk operator business to be twice as big by 2020 as when we started. Both on the top and the bottom line. But if such growth deprives us any agility, then it might not make sense to grow anymore”, says Jan Rindbo, CEO of Norden.

References Aarup, M., & Jöhncke, N. (2018). D/S Norden, Interview conducted 23 April. D/S Norden. (2014a). Carsten Mortensen Resigns as CEO of Dampskibsselskabet NORDEN A/S. https://www.ds-norden.com/investor/financialnews/ announcements/1403000518.html. Accessed 6 January 2020.

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D/S Norden. (2014b). Jan Rindbo appointed CEO of Dampskibsselskabet NORDEN A/S. https://www.ds-norden.com/investor/financialnews/ announcements/1414658396.html. Accessed 6 January 2020. D/S Norden. (2015). Dampskibsselskabet NORDEN A/S forenkler ledelsesstrukturen—ny direktion på plads. https://www.ds-norden.com/investor/ financialnewsdk/fondsboersmeddelelser/1439226840.html. Accessed 6 January 2020. Hoffstede Insights. (2019). Available via. https://www.hofstede-insights.com/ country/denmark/. Accessed 6 January 2020. Howe Robinson Partners Pte. Ltd. (2015). Back to the Future or Brave New World? Some Observations on the Future of the Dry Bulk Market. Kristiansen. (2015). Her er skitsen til Jan Rindbos strategi for Norden. https:// shippingwatch.dk/secure/Rederier/Toerlast/article7963138.ece. Accessed 6 January 2020. Mano and Chang. (2018). China’s Rebalancing: Recent Progress, Prospects and Policies (IMF Working Paper). Rindbo, J. (2018). CEO D/S Norden, Interview conducted 9 May.

CHAPTER 4

Maersk: Steering Clear of the Commodity Trap

Abstract The Danish shipping and energy conglomerate, Maersk, has been the largest and most important Danish shipping company since the Second World War. Following a bold investment in containerization in the 1970s and 1980s and followed by a wave of acquisitions in the 1990s and 2000s, the company by 2010s possessed the position as the world’s largest liner shipping company. But the segment was challenged by several factors including slower growth in the demand for ocean-going transportation and increased supply of ultra-large vessels—a combination which gradually led to lower margins and difficult market circumstances. On top of this came the digitalization, which made it possible to produce final products closer to the markets and to unveil complicated value chains. Maersk was at a crossroad. The conglomerate and all its shareholders had observed an alarming trend in its share prices as looming industry disruptions and a commodity trap were on the horizon. The strategy of cost-cutting and portfolio optimization had not returned the company to a growth trajectory, and a new strategy for the coming century was needed. This chapter is presented as a case study with real-life examples of dilemmas and opportunities faced by the top management and the company. Keywords Disruptions · Conglomerate · Commodity trap · Strategic direction · Industry integrator

© The Author(s) 2020 M. J. Iversen and J. Buhl, Danish Shipping in the 21st Century, Palgrave Studies in Maritime Economics, https://doi.org/10.1007/978-3-030-43324-6_4

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The Guiding Star Stairs are made for walking. This has been a guiding star for the Maersk employees for decades after decades walking the iconic spiralling stairwell at the imposing Esplanaden headquarter of the Danish shipping and energy conglomerate as it curved its way from the light and lofty entry ground floor the way up to the condensed atmosphere in the executive suites at the sixth floor. At the age of 98 years and supported by a cane Mærsk Mc-Kinney Møller, the son of the founding father, the longest-serving chief executive officer and the chairman over a lifetime, continued to climb these stairs (Nielsen 2012). The message was clear. There is no easy route to reach the top. Hard work and stamina are needed, and the elevators were for guests and notabilities. Such gradual ascent applied to all areas of the Maersk empire and was how the Maersk group had preferred to grow and develop. Careers are built on tenacity, trust and tenure while organic business growth within the shipping segment spurred numerous spin-offs evolving into new core businesses. Buying entire companies to take a short cut and jump the stairs has been tried at times but the general perception of a preference for gradual organic development has never faded. But faced with various industry disruptions throughout the conglomerate and a vicious cycle head towards commoditization within the core of the Maersk Groups business activities, a jump, leap or lift, that could get the company out of the trap trajectory, would be a blessing (Christiansen 2019). Heads rolled and heads spun to put the Maersk Group back in shape and three years later, in 2019, the Maersk elevators are for everyone and growth has its own department populated by sourced entrepreneurs and digital experts. Core businesses have been sold or shredded in a search for the shape of the future. This transformation of the global conglomerate, founded in the maritime community around the merchant city of Svendborg on the Danish island Funen in 1904 (Møller-Mærsk 2013), was initiated in the summer of 2016.

Svendborg and Around the World The Mærsk-Møller family founded company of Steamship Company Svendborg engaged in global cargo with its first vessel Svendborg in 1904 by father and son, Peter Mærsk-Møller and Arnold Peter Møller. The son,

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A. P. Møller, headed the company and rapidly expanded the business with a shipyard, cargo vessels, tankers and established a transpacific liner service, called Maersk Line, connecting the Fareast with the United States. By 1939 and the outbreak of the Second World War, A. P. Møller was the second-largest shipowner in Denmark with 46 vessels each sharing the name of Mærsk. From right before German occupation of Denmark on 9 April 1940 and in the following five-year wartime period, the majority of the Mærsk vessels were operated and instructed from the company’s New York office—an office headed by Mærsk Mc-Kinney Møller, the son of A. P. Møller. The war times cut the owned and operated fleet in half. 150 sailors and 25 of the Maersk fleet’ 46 vessels were lost to war causes. A massive number of new vessels were ordered, and by the mid-1950s, the characteristic and trademarked light-blue Maersk colour was applied for the first time. In the 1960s, the Mærsk operations spanned tanker vessels carrying oil and refined oil product, bulker vessels carrying any dry bulk commodity and general cargo carriers ploughing along lines between the major ports of the world. With energy exploration and extraction engagement in the North Sea initiated in the 1960s, the Mærsk flag was also raised on vessel supplying offshore oil and gas platforms. The first dedicated container vessel was contracted in June 1971 with delivery planned for January 1974 (Jephson and Morgen 2014). This Japanese built Svendborg Maerskwas later to be added to an expanded Maersk liner service and proved to be a key milestone for years to come as container vessels and container transport grew to be a major enabler of globalization and global trade flows. What followed from 1974 was even more business expansions, deeper engagement in energy production and offshore services and billions of dollar investments in assets related to the increase in global containerized trade. A container trade and industry relying on global economic growth and a continued liberalization of trades allowing for more efficient use of comparative advantages and spurring production offshoring and outsourcing.

From Two to Four Legs While the company was initiated as a shipping company, with Maersk McKinney Møller at the helm the Maersk company had diversified and taken large strides into somewhat related territory and had become a conglomerate of activities. In the 1960s and 1970s, new business opportunities in

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the energy sector were added as the company had an instrumental role in the Danish North Sea oil and gas exploration begun after concessions were granted 1962. Demand for energy increased rapidly and having security of supply proved valuable throughout the booming and uncertain 1970s and 1980s and at the onset of a globalization trend in the 1990s Maersk had built a conglomerate business involved in various parts of the two intertwined activities within the shipping and energy value chains. When Nils Smedegaard Andersen was given the corner desk at the top floor at Esplanaden in December 2007, he succeeded Jess Søderberg and held the reins of a diversifying conglomerate delivering top tier performing businesses in very different markets and supporting industries (Maersk 2015). A premium conglomerate (Collis and Shaffer 2014) walking on four home-grown legs within energy and shipping and sharing the same values and bright light-blue star of the Maersk Group that opens doors and business opportunities across the globe and well adapted to local market presence and services (Sornn-Friese 2017). Throughout the history of Maersk trimming, sales and shutdowns of parts or entire business segments were not new to the management and executive board of Maersk. In recent history, the sale of a major Danish retail business caused controversy on a national scale but the strategic value of such a disposition was never questioned (Poulsen 2013). Similar venerations were vented when Maersk disposed and closed the Danish shipyard activities (NA 2013), but again the critical questions related to the continued business rational of owning an ailing part of the value chain faded to a faint echo from the past. However, by 2015 and 2016, it became ever clearer that raising concerns around the short-term shareholder value and longevity of the longer-term strategic path of the Danish conglomerate did not fade in volume (Christiansen 2019). The executive management with chief executive officer Nils Smedegaard Andersen solidly placed at the top and the board of directors headed by the chairman Michael Pram Rasmussen, serving on his 13th year in the position faced the tough challenge explaining why various decisions in the past had failed to incorporate into significant shareholder return. By this crude metric of company performance, and disregarding volatility, short- or longer-term ups and downs and dividends, a shareholder having bought one stock in the Copenhagen stock exchange traded A. P. Møller-Mærsk A/S by the end of September 2005 at the strike price of

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DKK 10.971 could sell the same stock at the end of September 2015 at sharp discounted price of DKK 8.700. Since the 1980s business diversification also provided a natural hedge to cyclical market movements with a potential to stabilize the volatile income to a steady stream of solid earnings. Stabile earnings allowed for discounted rates on borrowed capital as the risk of non-return was perceived to be low for a well-diversified conglomerate. But this discount on borrowed capital for a conglomerate came at a cost. The corporate finance and portfolio theories widely used in the fierce short-term fixated financial markets heavy lean towards the confined and clean pure play players of any industry and have less taste for the stable stream of income provided by a conglomerate. This distaste translates into a conglomerate discount subtracted the summed value of the conglomerates individual business activities. A discount ranging in size from analyst to analyst with the most pure play fixated analysts applying a two-digit percentage discount on the calculated value of the public traded A. P. Møller Maersk Stock. With a market capitalized value of the listed stock equal to DKK 200 billion1 and assuming the stock trades at a fair asset value subtracted conglomerate discount, the price of a conglomerate shaves DKK 20 billion of the potentially traded value of the A. P. Møller Maersk business activities if they had been traded as separate entities on the stock exchange.2

Stock and Shareholders A consistently traded share price discount to the internally and externally perceived value of the sum of the individual parts of the Maersk conglomerate and the general trend in the price of Maersk share was an obvious concern for both management and the board of directors. A concern that did not fade in volume over when the crude facts showed prolonged periods of actual shareholder value destructed during the 2005–2015 period. That was not the path of over the business cycles envisaged from the plans put forth to the board of directors. Something needed to be done. 1 The traded share price of Maersk B shares as registered by Bloomberg on September 2019, https://www.bloomberg.com/quote/MAERSKB:DC. 2 Assuming an average 10% conglomerate discount subtracted from the accumulated value estimates.

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That something landed on the desks at another office on the sixth floor at Esplanaden. At the desks of the Group Strategy office, headed by Morten Bo Christiansen. An engineer by training turned business consultant by five years at the Boston Consulting Group, he had joined A. P. Moller-Maersk in 2011 and held various positions within Group functions and at the business entities. In December 2015, he climbed the stairs to the top floor and became the head of the Group strategy office a few meters down the corridor from CEO Nils Smedegaard Andersen corner office (Christiansen 2019). Besides being the main supplier of business benchmarking and performance indications, the guiding star for the company’s allocation of new capital for investments within the various business activities, the strategy office also was the coordinator and facilitator of strategic discussions among the executive management and reporting directly to the top. Alternative plans for strategy revamps had passed his desk during the first six months on the sixth floor. But all had failed to gather collective enthusiasm at the executive board. They wanted something completely different from what they had been presented before. “A new direction was requested”, recalls Morten Bo Christiansen and adds that what was asked for was a fundamental review of what the Maersk company wanted to do in the future. “We have existed in more than 100 years and need to ensure that we are here and still relevant in next 100 years” (Christiansen 2019). This board decision of a new direction required a change away from the past decade where Maersk had been headed by Nils Smedegaard Andersen. At the boards’ direction, Nils Smedegaard Andersen resigned effective of 1 July 2016 and was replaced by Søren Skou, the CEO of the Group’s largest business activity, the container shipping activities within Maersk Line (Møller-Mærsk Group 2016a). The official statement in the Maersk Groups quarterly report for the second quarter of 2016 sums up the work ahead and why this strategic review was needed. “Recognising the Group’s low growth and returns the Board of Directors has during Q2 initiated a process to develop and consider the strategic and structural options for the Maersk Group to further increase agility and synergies. The purpose of this review is to ensure that the Group remains strong, profitable and financially viable as the Group develops new growth opportunities” (Møller-Mærsk Group 2016b).

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Facing Two Disruptions With a clear mandate to turn every stone in the search for the 100year sustainable strategy for Maersk, none of the current activities within energy and shipping were left unexamined. Two fundamentally different industries and areas of activities bound together by the financial rationale of a natural hedge existing from having both energy production and energy consumption within the conglomerate. The wisdom of this hedge had been explained repeatedly during the last decades, but as global markets developed, and paper trading options evolved a growing disconnection between earnings in an oversupplied shipping market and the volatile price movements of the benchmark crude oil became evident. The hedge had broken, and the two areas of activities were no longer naturally bound together. “We faced a fundamental choice between transport and logistics or energy”, says Morten Bo Christiansen (Christiansen 2019). Two industries both facing significant disruptions, but distinctively different disruptions. The companies operating within the energy industries needed to transform their scope and operation away from the fossil fuel world of the past century and into a renewable direction where any extraction from the earth deposits might be frowned upon. The disruptions faced by the companies operating within the transport and logistics industries were less apparent and clear and had much less public attention. Industries where the modus operandum in many ways had been the same for the last 100 years (Sanders and Egloff 2019). The German-invented telex machine remained widely in use within shipping and transport, when other industries modernized and turned to integrated information technology, and the antiquated facsimile or telefax can still be seen in shipping offices around the world. A strong veneration for old communication technology and a preference for printed papers to be signed and authorized caused and continue to cause massive inefficiencies. Implementing new technologies and a complete rethink of the current operating model has the potential to disrupt the traditional ways of doing shipping, transport and logistics (Christiansen 2019). “Our conclusion was, if we only looked at profits, there was more potential on the energy related activities”, explains Morten Bo Christiansen.

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When he and his team of experts in the summer of 2016 looked into the future and cross-referenced with the consensus of the wider oil industry and the expansive field of oil price forecaster, the clear view was that oil price and hence the earnings potential for Maersk’s oil- and gas-related business activities within drilling, extraction and related offshore production services would increase at a higher rate than the shipping and transport activities (Baffes 2016). “But when you face an industry in disruption, would you then prefer to be the industry leader or an industry player? Obviously, within transport and logistics, we have a leading role. Everyone knows Maersk, and Maersk has all the world’s largest customers. We ship 20% of all the goods shipped in the world and contribute to increase in global trade and all the great things derived from that. That means a lot to us”, says Morten Bo Christiansen. Armed with this conclusion of the preferred position in an age of industrial disruption, an obvious task was to get out of the energy sector and refocus on containerized shipping and transport services. But digging deeper into the treats of the container industry also uncovered a better understanding of why earnings in the container industry had been so depressed in recent years. Riding high on a groundswell of global trade turning away from general cargo shipping and towards containerized shipments, the container industry overall had had heydays for the past 30 years.

A Self-Inflicted Vicious Circle Liberalization of global trade since the 1970s and eliminations of various barriers for trade between countries provided a platform for regionalization and globalization of trade flows (Woetzel et al. 2017). By the 1980s, production of all kinds of goods moved from high-cost areas in the United States and Europe towards Asia and Japan (OECD 2019). The entry of the Middle Kingdom of China to the World Trade Organisation in 2001 further fuelled this trend overproduction outsourcing, with a fully fledged integration of global supply chains seen as the clear endpoint (Wright 2009). Any goods production could and should be produced where it was most cost-efficient and containers and carriers were the glue that tied supply and demand together. With such an apparently strong growth trend foreseen, investments in container vessels skyrocketed. The number and size of container vessels

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within shipping companies operated fleet was the yardstick for market dominance and share of the exponentially growing market and earnings of the future. And China was the main driver of growth in global trade flows. From 2000 to 2008, the Chinese seaborne import grew by an average of 17% per year (Kristensen 2017) as the economy modernized and invested in infrastructure to cater for the boom in income and goods production. Goods heading predominantly to the world largest consumptions areas in North America and Europe. Such was the mood by 2008 when the global economy was hit by a US-initiated financial crisis. Consumer spending in the world’s largest and most advanced economies dropped. With an abundance of new and everlarger container vessels heading to the sea, the rates obtained for shipping a container from China to Europe also took a sharp drop (UNCTAD 2010). And the following reactions from the container shipping industry had spiralling effects leading to a path towards a dreaded commoditization of the entire industry with the only determining factor of demand being the ability to be the lowest-cost provider. At the onset of the work towards a new long-term strategy for Maersk, the container freight rates in 2016 reached record low level as weak demand and a continued flow of new and larger vessels entered the market (UNCTAD 2016). With all industry players reaching for the lowest cost and operational cost-cutting, the service provided to customers also declined. This was to be the start if a self-inflicted vicious circle heading towards a commodity trap (Quelch 2007)—a trap within container shipping where transport products and related services are downgraded to “commodities”, with limited differentiation between the industry players and where competition is based on the price offered. “This decline in services all over the industry allowed our customers to be even more tough in the freight rate bargaining, driven prices down even further and a vicious circle was formed”, says Morten Bo Christiansen. Having visualized this vicious circle towards a commodity trap, the straightforward strategy proposal of turning away from energy and refocusing on generating earnings from container shipping needed to be re-examined and refined.

Assets as Liabilities During the summer of 2016 and digging deeper into this re-examination of the Maersk’s core business traits, it dawned on the strategy department

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that operating an asset-heavy business in a mature industry undergoing intense global competition had a cost. A cost derived by customer neglect, when the focus of an entire organization, the focus of its peers and the cornerstone of all competitive attention within an industry are to lower operational and capital costs and reach new records of economics scale. “If you operate a very asset-focused business, it has the price that you easily lose focus on your customers. So, whatever the strategies might be, they needed to be more customer oriented”, says Morten Bo Christiansen. Turning away from the notion of asset and especially vessel ownership as a primary characteristic of the core part of the Maersk company collides with inherent cultural views in Maersk. Throughout recent managerial Maersk history, any new entrant to executive management board at Maersk was also bestowed the prestigious title of shipowner—a title providing ownership shares of Maersk’s owned vessels and hence the top title to strive for as an employee ashore or at sea. A ship owning company benefitted from the full responsibility of the entire value chain from port to port. With a perception that no one could outdo Maersk on operational performance from port to port, the full ownership of the vessels was a competitive advantage. A competitive advantage is taken ashore by an increased global presence of owned and operated port. But as the operational performance by peers picked-up and a race to the bottom of the cost curve started the best performance was no more than a measure of who could offer the lowest price (Oyku 2017). However, dumping massive amounts of assets onto the market was not a feasible solution when Maersk was the dominant and largest owner and operator in the industry. The thinking turned towards how to bring new life and value to asset ownership and operation of critical infrastructure along the entire value chain. “We need to be able to solve all our customer problems and not just operate vessels”, says Morten Bo Christiansen.

The Return of the Integrator On the way towards a conclusion on the strategic direction for the future, it occurred to all the parties involved that the new direction was a return to old and almost forgotten ways of the past, a past when Maersk and other shipping companies ensure smooth and integrated transport solutions all the way (Sornn-Friese 2017)—all the way from the producers’

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warehouses and to the doorsteps of the consumers and not just from port-to-port. “The strange thing is that container shipping actually started out by being an integrator. In the early days of shipping everyone door-to-door. No one needs the goods anywhere on the route between Shanghai and Bremerhaven, Germany. Customers always need the goods somewhere else than at the ports”, says Morten Bo Christiansen. Maersk’s asset ownership of ports, storage facilities and vessels needed to be looked at coherently and across the board as a mean to meet any client need. These assets are critical infrastructures for all global trade flows, and it is at port side and on the vessels new and essential information on the actual status of the goods is continuously generated (Christiansen 2019). Being able to extract value from having access to this critical information, extract this information and turn them into valuable customer insights and streamed digitalized services (Lal and Johnson 2018) would add value. With asset ownership, a commercial mindset and operational competence Maersk saw a potential in being uniquely positions to act on any new customer request based on these updated insights. “We want to be an integrator in our industry”, says Morten Bo Christiansen and adds that the role integration has everything to do with information. “When moving cargo, you are also moving information. And because we have the source of this information, we can always be one step ahead. This is our thesis and what we need to prove. We haven’t proved it yet”. “But imagine, that you are a sports equipment producer have a container loaded with pink trainers on its way to Istanbul, Turkey. Then you realize that those specific trainers are not at all in demand in Turkey, but are hugely in demand in Cape Town, South Africa. If you could contact us and ask that at the next port, you would like this particular container to be offloaded and redirected. This could be of immense value and is something we have started to be more interested”, says Morten Bo Christiansen (2019). Returning to the role of an integrator might at a first glance seems like turning back time and taking a few steps down the stairway to steer away from the trajectory towards a commodity trap. But taking a few steps back and even looking for lifts to leapfrog into new growth avenues could point Maersk anno 2019 into the right direction and elevate growth and business activity in the coming 100 years.

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References Baffes, J. (2016). World Bank Raises 2016 Oil Price Forecast. World Bank. https://www.worldbank.org/en/news/press-release/2016/07/26/worldbank-raises-2016-oil-price-forecast. Accessed 6 January 2020. Sanders, U., & Egloff, C. (2019). Boston Consulting Group. Digital Transformation in the Shipping Industry, Boston Consulting Group, Center for Digital in Transportation. https://www.bcg.com/industries/transportationtravel-tourism/center-digital-transportation/shipping.aspx. Accessed 6 January 2020. Christiansen, M. (2019). Maersk, Interview conducted 26 June 2020. Collis, D., & Shaffer, M. (2014). Group Functions at the Maersk Group. Harvard Business School Case 715-432 (Revised February 2016). Jephson, C., & Morgen, H. (2014). Creating Global Opportunities: Maersk Line in Containerisation 1973–2013. Cambridge: Cambridge University Press. Kristensen, N. (2017). Market Presentation, Danish Ship Finance. Lal, R., & Johnson, S. (2018). Maersk: Betting on Blockchain. Harvard Business School Case 518-089. Maersk. (2015). Maersk Group Capital Markets Day. https://investor.maersk. com/events/event-details/capital-markets-day-2015-0. Accessed 6 January 2020. Møller-Mærsk, A. P. (2013). A. P. Møller—Mærsk A/S—Annual Report 2012. https://investor.maersk.com/static-files/1fc944a5-7344-4639-96097ddafc9ff453. Accessed 6 January 2020. Møller-Mærsk, A. P. (2016a). A. P. Møller—Mærsk A/S—Søren Skou Appointed New CEO of Maersk Group. http://investor.maersk.com/news-releases/newsrelease-details/ap-moller-maersk-soren-skou-appointed-new-ceo-maerskgroup. Accessed 6 January 2020. Møller-Mærsk, A. P. (2016b). A. P. Møller—Mærsk A/S—Interim Report Q2. http://investor.maersk.com/static-files/900f68ff-0b74-4fb8-b29bf17e9718b9aa. Accessed 6 January 2020. NA. (2013). A. P. Møller-Mærsk sælger Lindø, DR. https://www.dr.dk/nyheder/ regionale/fyn/p-moeller-maersk-saelger-lindoe. Accessed 6 January 2020. Nielsen. (2012). Mærsk bekræfter myten: Hr. Møller tog trapperne op til 6. sal, DR. https://www.dr.dk/nyheder/indland/maersk-bekraefter-myten-hrmoeller-tog-trapperne-op-til-6-sal. Accessed 6 January 2020. OECD. (2019). Understanding the Global Trading System/Why Open Markets Matter. https://www.oecd.org/trade/understanding-the-global-tradingsystem/why-open-markets-matter/. Accessed 6 January 2020. Oyko. (2017). Maersk and Digital Revolution in Shipping Industry. Harvard Business School, MBA student perspective. https://digital.hbs.edu/platformdigit/submission/maersk-and-digital-revolution-in-shipping-industry/. Accessed 6 January 2020.

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Poulsen. (2013). Pressemøde: Mærsk sælger stor del af Dansk Supermarked, DR. https://www.dr.dk/nyheder/penge/pressemoede-maersk-saelger-stor-del-afdansk-supermarked. Accessed 6 January 2020. Quelch, J. (2007). How to Avoid the Commodity Trap. Harvard Business Review. https://hbr.org/2007/12/how-to-avoid-the-commodity-tra. Accessed 6 January 2020. Sornn-Friese, H. (2017). ‘Containerization in Globalization’: A Case Study of How Maersk Line Became a Transnational Company. In N. P. Petersson, S. Tenold & N. White (Eds.), Shipping and Globalization in the Post-War Era. Cham: Palgrave Macmillan. UNCTAD. (2010). Review of Maritime Transport. United Nations Conference on Trade and Development. https://unctad.org/en/Docs/rmt2010_en.pdf. Accessed 6 January 2020. UNCTAD. (2016). Review of Maritime Transport. United Nations Conference on Trade and Development. https://unctad.org/en/PublicationsLibrary/ rmt2016_en.pdf. Accessed 6 January 2020. Woetzel, J., Jeongmin, S., Madgavkar, A., Yi Lin, D., & Lund, S. (2017). China’s Role in the Next Phase of Globalization. McKinsey Global Institute. https://www.mckinsey.com/featured-insights/china/chinas-role-in-thenext-phase-of-globalization. Accessed 6 January 2020. Wright, N. (2009). China’s Emerging Role in Global Outsourcing. China Business Review. https://www.chinabusinessreview.com/chinas-emerging-role-inglobal-outsourcing/. Accessed 6 January 2020.

Conclusion

Disregarding all the market turmoil and strategic upheaval observed in the last two decades, thesis of the Danish merchant fleet has tripled from an owned fleet in the late 1990s of around 12 million DWT to around 36 million DWT in the late 2010s while the number of members in the Danish Shipowners Association (representing around 90% of the revenue in the sector) expanded from 20 members in 1998 to 48 members in 2015, when Denmark was the world’s fifth-largest shipping nation in terms of operated fleet (UNCTAD 1998, 2017). The expansion in terms of fleet activities and the number of shipping companies could be interpreted as a natural consequence of enhanced market opportunities in terms of globalization and a general growth in seaborne trade. But the deterministic view on strategic and structural changes cannot be justified by the realities of market dynamics and competition in the maritime industry. The two first decades of the 21st century showed very different growth patterns between shipping companies and maritime nations. A good example is various fleet developments of two Scandinavian countries. In 1998, Sweden and Denmark possessed the positions as, respectively, tenth and fifteenth largest maritime nations in the world. Twenty years later— in 2019—the positions were very different. Denmark held the positions as number 13, surpassed by emerging and state-backed shipping nations predominantly located in the growing Asian region but unsurpassed by

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 M. J. Iversen and J. Buhl, Danish Shipping in the 21st Century, Palgrave Studies in Maritime Economics, https://doi.org/10.1007/978-3-030-43324-6

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the traditional old guard shipping nations. Sweden, on the other hand, had declined to a position as number 35 (UNCTAD 1998, 2019). There are two main explanations for the fundamental national variations and the continued relative strength of the Danish position as a shipping nation over long time: firstly, the various strategic responses to global markets at the corporate level and, secondly, the different institutional circumstances which varied between countries. The strategic explanations need to be found at the individual corporate level, and this book includes three cases of corporate strategic answers to the changing market conditions after the year 2000: the newcomer Hafnia Tankers in product tank utilizing entrepreneurial energy, invaluable experience, access to a thriving industrial cluster and an extensive network within the shipping sector. The old medium-sized dry bulk company Norden benefitting as well as burdened by past positions and commitments on the journey towards strategic agility when faced by structural uncertainty. And the giant container company, Maersk Line, trying to reinvent a premium energy and transportconglomerate by leapfrogging back into the role as a customer-focused logistical service provider and away from the commodity trap and an industrial competition solely focused on cost advantages generated by lowest-cost asset operation and capital commitments. The institutional changes took place at several levels. Obviously, the transnational level has been important in shipping, and it included legal regimes at the IMO and EU levels. These institutional settings could not explain variations between maritime nations, and despite the global nature of shipping, the national institutional setting continued to be important in particular in relation to taxation, recruitment (including education and research) and legal implementations (Iversen and Tenold 2014). The Danish institutional settings were mirrored by the policies of the Danish Shipowners’ Association, which developed in three distinct phases from the late 1990s to the late 2010s: the liberalistic market phase, the cluster formation phase and finally the phase of active industrial policies. The liberalistic market phase was in particular present in the late 1990s when Danish Shipowners focused on shipping facilitating free trade and economic growth. The cluster formation phase followed by early 2000, when environmental concerns and regulatory requirements fostered an environment for promoting Danish shipping as “Quality shipping” centred around a cluster which included competitive tax legislation, proactive approach to environmental issues and security and finally an educational

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and research-based foundation. The financial crisis in 2008 and 2009 led to major changes in activity and scale of Danish shipping companies and translated into a phase of active industrial policies. Policies resting on three pillars of “quality shipping”, ensuring global competitiveness for local companies and an approach of a holistic cluster including education and research at an international level. These policies and this environment cultivated numerous new entrants to the Danish shipping industry and safeguarded the global competitiveness of incumbents throughout the roller-coaster ride shipping companies have experienced in the last two decades. Two decades where Danish shipping companies in periods scaled down in their commercial activities, especially after the financial crisis in 2009. The general income from shipping dropped dramatically from close to 200 billion DKK in 2008 to around 140 billion DKK in 2009. In the following ten years from 2008 to 2018, the total currency income from Danish shipping stagnated around 200 billion DKK. The Danishoperated fleet adjusted after the financial crisis in 2008, while difficult market conditions in product tank, container shipping and dry bulk capped the operated Danish fleet compared to pre-crisis level. From 2015 to 2018, the operated fleet grew again. Primarily, this growth was driven by the fleet acquisitions made by Maersk Line in 2011 with future delivery and benefitting from generally favourable Danish conditions for shipping activities. The acquisitions were deemed necessary to compete in a fiercely competitive and commoditized container shipping environment, but now being questioned by a new, less asset and more customer-centric, strategic direction of Maersk. Secondly, new market opportunities in product tank, as exemplified by the decisions made and path taken by Hafnia Tankers, added vessels and commercial activity to the Danish cluster. Thirdly, a range of newcomers to Danish shipping added operational activity while most others, exemplified by the dry-bulk activities at Norden, shifted strategic focus as volatile market conditions and growing anxiety of the uncertainty of the future favoured asset-light and agile business models. The common themes for the three cases and the illustrated enlarged fleet and expanded shipping activities orchestrated and operated from Denmark are a continued effort to reinvent business models, an entrepreneurial spirit grounded by vast amounts of shipping capabilities

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and a refined and contemporary regulatory framework supported by a vibrant research and educational institutions.

References • UNCTAD, Review of Maritime Transport 1998 and 2018 UNCTAD/RTM(98)/(2018) 1UNCTAD. • Iversen, M. J., & Tenold, S. (2014). The Two Regimes of Postwar Shipping: Denmark and Norway as Case Studies, 1960–2010. International Journal of Maritime History, 26(4).

Glossary of Key Shipping Terms

Asset heavy A commercial strategy based on accumulating asset ownership to ensure market share Asset light A commercial strategy with limited or no vessel and asset ownership within a company Asset play A commercial strategy based on asset and vessel sale and purchase Bulker A vessel having numerous cargos holds enabling it to carry various dry bulk commodities Capesize bulk carrier A bulker vessel with 100,000 DWT or above Chartering The hire of a vessel for commercial operation within a given time frame Chemical tankers A tanker vessel specialized in carrying chemicals Commercial operation See operator Commodity A raw material, unprocessed good that is widely traded with limited product difference between various production origins Commodity trade A trajectory of a given industry products or services is downgraded to “commodities”, with limited differentiation between the industry players and where competition is primarily based on price competition Conglomerate A diversified company with significant business activities and asset ownership within several industries

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 M. J. Iversen and J. Buhl, Danish Shipping in the 21st Century, Palgrave Studies in Maritime Economics, https://doi.org/10.1007/978-3-030-43324-6

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GLOSSARY OF KEY SHIPPING TERMS

Conglomerate discount A discount subtracted to the summed value of the conglomerates individual business activities Containerized shipping Ocean and land transport of goods within containers Disruptions Disturbances or challenges which interrupt and alter current business processes and activities Dry bulk Transport of dry commodities such as coal, iron ore or agricultural products in bulker vessels DWT Dead weight ton, see also tonnage Futures curves Exchange traded contract prices for specific future freight services aligning to freight index prices Globalization The rapid increase in global trade of goods and services leading to growing interdependence between trading partners Handysize bulk carrier A bulker vessel with 10,000–40,000 DWT Handysize product tanker A product tanker vessel with 27,000– 42,000 DWT Integrator Ensuring increased interaction within and between industries, markets and businesses Liberalization of trade Lowering barriers for trade and increased globalization Liner operation Commercial operation of vessel with fixed port calls LNG/LPG carrier A tanker vessel equipped with numerous tanks enabling it to carry liquified natural gas or liquified petroleum gasses LR1 product tanker A product tanker vessel with app. 75,000 DWT Maritime cluster Numerous independent companies having related maritime business activities within a concentrated geographical area Merchant fleet Commercially active vessels operated within a defined company or group of companies MR product tanker A product tanker vessel with 42,000–60,000 DWT Natural hedge Having business activities within two unrelated businesses with business cycles that are perceived to be negatively correlated New building option A contractual option to initiate the construction of a new vessel at specified terms Operator Responsible for the commercially operation of a vessel’s activity Outsourcing Relocation of production from areas of product demand to other areas of perceived lower cost of production Panamax bulk carrier A bulker vessel with 65,000–100,000 DWT

GLOSSARY OF KEY SHIPPING TERMS

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Pool management Commercial management of a pool of vessels owned by various ship owners A price curve Portfolio optimization Ensuring that a company’s portfolio of various business activities remains optimal Product tanker A vessel specialized in carrying refined oil products such as gasoline, kerosene or palm oil Project carrier A vessel with one cargo hold enabling it to carry a range of cargo specifications Ship-owner Owner of a vessel Tanker A vessel having numerous tanks enabling it to carry various wet bulk commodities Technical operator Technically operates a vessel’s activity Tonnage The carrying capacity of a vessel or a group of vessels Tramp operation Commercial operation of vessels without fixed schedules Wet bulk Transport of wet or fluid commodities such as crude oil, gasoline or palm oil in tanker vessels

Index

A Aalborg Portland, 6, 8 ADM, 15 Amerika Kaj, 13 Andersen, Nils Smedegaard, 56, 58 ANE Shipping of Norway, 13 Arctic Umiaq Line, 6 Armada Shipping, 6 Asset ownership, 62, 63 Atlantic Chartering Service, 4 Atlas Shipping, 14, 19

B Bagge Christensen, Lars, 15, 21, 47 Baltic Dry index, 44 Baltnav, 7, 10, 11, 20, 21 Barclays Natural Resource Investments, 30, 31 Boesen, John, 15 Bonderup, Ejner, 19 Bonderup, Michael, 11 Borealis Maritime, 13

Boye Petersen, Mads, 16 BP Gas Tankers, 6 Breakwater Capital, 12 BTS Tanker Partners Limited, 36 BW Dry Cargo, 4 BW Group, 38 BW Tankers, 38

C Capesize, 47, 48 Cargill, 15 Castel AS, 31 Celsius Shipping, 7, 10, 12, 21 Chandler, Alfred D., 3 Christensen, Niels Stig, 12 Christiania Shipping, 10, 13, 22 Clausen, C., 8, 10 Clipper Group, 7, 9, 10, 13, 15, 18, 20, 22 Cluster, 2, 4, 13, 15, 19, 20, 28, 29, 35, 37, 38, 43, 45, 68, 69 Colberg, Per, 15

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 M. J. Iversen and J. Buhl, Danish Shipping in the 21st Century, Palgrave Studies in Maritime Economics, https://doi.org/10.1007/978-3-030-43324-6

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INDEX

Commoditization, 54, 61 Commodity trap, 61, 63, 68 Conglomerate, 2, 30, 34, 35, 38, 43, 54–57, 59, 68 Conglomerate discount, 57 Container, 3, 8, 12, 16, 21, 55, 58, 60, 61, 63, 68, 69 Critical Information, 63 Critical Infrastructure, 62, 63 Crystal Nordic, 13

D Dampskibsselskabet Svendborg, 16 Danica, 15, 16 the Danish Financial Supervisory Authority, 16 Danish Shipowners’ Association, 3, 6 DFDS, 2, 6–10 Differentiation, 61 Digitalization, 45 Diversification, 2, 3, 57 Door-to-door, 63

E East Asiatic Company (EAC), 2, 6, 8, 10 Egvang, Martin, 15 Eitzen Ethylene Carriers, 13, 22 Eitzen Group, 13, 22 Elsam, 6 Embarcadero, 13 Energy, 14, 28, 37, 54–56, 59–61, 68 Enslev, Stig, 15 Essberger, John T., 13 Esvagt, 7, 10 Eurostat, 19 Evergas, 7, 10, 13, 14, 22

F Falcon Maritime, 7, 10, 14, 15

Falcon Rederi, 14, 15 Focus and simplicity, 47, 48 Formentera, 14 Fortuna Seaside Bulk Carriers, 4 Frederiksen, John, 12 Freeman, Chris, 2 Frontline, 12 Fruergaard, Mikkel, 19

G Genco Shipping, 4 Glencore, 15 Grontmij Design Team, 14

H Hafnia Management, 30–32, 35, 36 Hafnia Tankers, 28, 29, 32, 34–38, 68, 69 Hahnemann, Søren, 15 Handysize, 11, 14, 16, 34, 47 Hansen, Morten, 19 Hansen, Uffe, 18 Hellerup, 4, 13, 15, 19, 28, 31, 32, 34 Henriksen, Morten, 12 Henrik Sornn-Friese, 3 Herning Shipping, 13, 22

I Ice Class 1A, 17 ID-Ships, 10 Industry disruptions, 54 Ineos, 14 Integrator, 62, 63 Integrity Bulk, 7, 10, 15, 18, 20, 21

J Jaccar Holdings, 13, 22 Jein, Peter, 11, 16

INDEX

Jensen, Jeppe, 12, 21 JL, 2, 6, 7, 9, 10, 22 J. Lauritzen, 8, 11, 20, 30, 34–36 Johansen, Anders, 11

K KKR, 13 Kristensen, Bo Knold, 14, 21

L Lægernes Pension, 16 Levin, Christian, 19 LNG, 12, 14, 16, 21, 22 Logistics, 3, 11, 59, 60 London, 12, 21, 30, 36 Louca, Francisco, 2 LR1, 34 LR2, 12

M Maersk, 7–10, 16, 21, 22, 30, 43, 45, 54–63 Maersk Brokers, 15 Maersk Group, 12, 54, 56, 58 Maersk Line, 2, 55, 58, 68, 69 Mærsk Mc-Kinney Møller, 15, 54, 55 Maersk Tankers, 7, 9, 10, 15, 21, 29 Mærsk Uggla, Robert, 15 Mikkelsen, Rene, 18 Mikkelsen, Thomas, 18 Møller, Arnold Peter, 2, 6, 8, 15, 16, 55 MOL Nord Tank, 7, 10 Monaco, 12 MR, 12

N Navigare Capital, 10, 15, 16, 21

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Navigare Capital Partners, 4, 7, 15, 16 Navision, 7, 10, 11, 16 Norden, 2, 4, 6–10, 19–22, 42, 43, 45–50, 68, 69 Nordic Bulk, 7, 10, 16 Nordic Shipping Europe, 4 Northern Sea Route (NSR), 17, 21

O Oaktree, 12 Odfjell Gas, 12 Oldendorff Carriers Denmark, 4 Ove Skou, 8, 10

P Pacific Basin, 45 Panamax, 19, 48 Pangea Logistics Solutions, 17 Pension Danmark, 15 PGSC Shipping, 4 Phoenix Bulk Carriers, 17 Pihl, Kim, 19 Port-to-port, 63 Premium conglomerate, 56 Product operator, 36 Product tanker, 12, 16, 21, 28–38 Pure play, 28, 36, 37

R Ramskov, Henrik, 15, 21 Rederiet Erik Winther, 6 Rederiet Knud I. Larsen, 6 RN Holding, 7, 10 Royal Arctic Line, 6

S Sato, Martin, 11 Schmidt, Michael H., 14

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Seahorse 35, 14, 15, 21 Shanghai, 14, 50, 63 Shell, 37 Ship operator, 5, 29 Ship owner, 5, 29 Shipowner, 5 Singapore, 4, 11, 14, 18, 38, 42, 43, 50 Skagen, 18 Skou, Søren, 58 Slinger, Marc, 18 Søderberg, Jess, 56 Sodrugestvo, 11 Sønderborg Rederiaktieselskab, 6 Spring, Finn, 18 Stena Bulk, 7, 9, 10 Supramax, 11, 48 Sylvester Jensen, Per, 13

T.K.B. Shipping, 7, 10 Tønnevold & Clausen (T&C), 18, 22 Torm, 2, 6–12, 23, 29–31 Transport, 2, 5, 14, 16–18, 22, 47, 55, 59–62, 68 Trithorn Bulk/Thorco Bulk, 4, 18 Triton, 13

T Takechi-Hansen, Rasmus, 11 Tankers Inc., 28–34 Tayrmyr Island, 17 Team Tankers, 7, 10 Terntank Tankers, 7, 10 Thorco Projects, 7, 11, 18, 22

W WECO Shipping, 7, 10 Western Bulk, 18

U Ultrabulk, 9 Ultramar, 7, 10 Unifeeder, 7, 10 Uni-Tankers, 7, 10 V Value chain, 56, 62 Vonsild, 19

X XO Shipping, 7, 11, 19–21