During this craic-free week you could be forgiven for letting the mind drift to a land of parties so good that nobody can remember actually attending them. But no, the piercing cold of the Dublin Bay sea waters in the shadow of Joyce’s Martello tower was the prompt for a more serious reflection on maritime power rather than merry delinquency. Dominant power, in fact. Just over a century before Johnson & The Jobsworths bloviated into Downing Street, the British Empire at its peak accounted for more than a fifth of the world’s population and a quarter of its land mass. How did that happen – the empire, not the lockdown party? Look to the sea again – the critical instrument of Britain’s power and control of such a large territory and economy was its investment in the most advanced naval force and supporting infrastructure in the world.
When Britannia ruled the waves warships, ports and strategic defences like the Martello towers were used to exert control and protect global supply chains. Fast forward to today and one could argue that corporates rather than sovereign states are the new masters of global supply chains. Two companies in particular caught the eye in recent weeks and provided an insight into how much the global economy has changed in some respects but also how little has changed. Let’s start with change and a new global empire, Amazon.
Amazon is best known for its e-commerce dominance and its hugely profitable cloud services, AWS. However, Amazon is quietly but massively increasing its investment in logistics infrastructure in order to bypass pandemic supply chain chaos. Did you know that Amazon’s own delivery service delivered more packages than FedEx in 2020? Amazon is now shipping 72% of its own packages, up from 47% in 2019, according to SJ Consulting. Returning to our maritime theme, the Bezos behemoth spent $61 billion on shipping in 2020 by chartering private cargo ships which gives Amazon the flexibility to avoid the most congested ports. And now it’s trying to control the earliest part of the logistics chain by making its own 53-foot cargo containers. Yep, manufacturing. Now consider the following and wonder whether this is a tech business….
- Amazon has increased its fleet of delivery vans to over 20,000
- Off the roads the company has invested $1.5 billion in an airport cargo hub
- And in the skies fifty 767 cargo planes have been purchased by Amazon
The key point is that Amazon is trying to cover all the bases in the supply chain. It also is flexing its economic muscle if recent UK headlines are to be believed – UK hauliers ditch container work in favour of Amazon ‘gold rush’. So, Amazon which is making huge margins in cloud computing infrastructure appears to be pretty keen on some ‘old economy’ logistics infrastructure too. Surely, the margins can’t be as attractive? Then this headline popped up this week…..
Maersk enters strategic logistics partnership with Unilever
This writer used to scribble about this Danish container shipping stock back when the TMT bubble had just burst. In those days my fascination was that only a couple of hundred shares of the stock traded each day despite Maersk controlling the world’s largest container shipping fleet, more than 30 ports, significant oil and gas fields, a 10% stake in Danske Bank and a remarkably lucrative relationship with the US Marine Corps. It was the most remarkable asset/sum-of-the-parts story in the market and nobody seemed to care. They do now.
Maersk’s market value/share price has increased seven-fold and along the way has ditched all its non-core assets. Maersk is now the dominant container shipping logistics player in the market with more than 700 ships in its fleet. The 4 year deal with Unilever is striking because in Maersk’s own words “we are excited that Unilever has chosen our logistics expertise and our technological platform NeoNav to provide an overview of the links that make up its ocean and air logistics operations.”
This deal is about more than ships. There’s technology involved too despite the traditional modes of transport used. And that prompts a further thought. Amid the frenzy for tech stocks there are a number of “old economy” sectors which are generating market excitement and attracting influential capital. Let’s not forget that the 2021 Time Person of The Year has been announced and he’s an “old economy” manufacturer of automobiles with a trillion dollar franchise. Yep, the richest man in the world, Elon Musk, built a car company. Whoodathunk! I’m thinking the Vikings might have known.
Transport and logistics still remain key components of the global economy. Technology helps but transport infrastructure assets like shipping and ports remain critical and it is interesting that both Maersk and Jeff Bezos share Danish/Viking heritage. Possibly more interesting is how the UK in less than 100 years saw its influence and empire dramatically shrink but then decided that a voluntary world-first trade reduction treaty was a good idea. To add insult to this self-inflicted pain, the nation of Drake and Nelson who ruled the waves have turned to the likes of Williamson, Hancock, Johnson, Truss, Dorries, Raab, Rees-Mogg, Gove and Patel to run the bath in dinghies….and fail miserably.