With around 90% of today’s world’s trade being transported by sea, shipping containerization is big business. Neptune Orient Lines (NOL) (SGX: RE2) was founded in 1968, by the Singapore Government. The idea was that by shipping the nation’s trade at fair freight prices, it should maintain a supply line of essential cargoes during times of crisis. However, NOL’s roots can actually be traced back much further – to the USA of all places, 120 years earlier. Howland & Aspinwall Born in New York City in 1801, William Henry Aspinwall started his working life with the family’s firm of Howland…
Neptune Orient Lines (NOL) (SGX: RE2) was founded in 1968, by the Singapore Government. The idea was that by shipping the nation’s trade at fair freight prices, it should maintain a supply line of essential cargoes during times of crisis.
However, NOL’s roots can actually be traced back much further – to the USA of all places, 120 years earlier.
Howland & Aspinwall
Born in New York City in 1801, William Henry Aspinwall started his working life with the family’s firm of Howland & Aspinwall, specializing in trade with the Caribbean. He was soon running the company, and oversaw expansion into South America, China, Europe and the Mediterranean.
Realising that faster ships meant more profit, Aspinwall commissioned a naval architect to help him design what some have called the first clipper ship, “Rainbow”.
In 1845, Aspinwall acquired the contract to deliver mail between Panama and Oregon – an unusual choice considering few passengers wished to travel by the fast but expensive steamer to help boost profits. What’s more the route had no great ports, facilities, industries or coal – or even repair yards that could service steamers.
Undeterred, Aspinwall founded the Pacific Mail Steamship Company (Pacific Mail) and ordered three new steamships to inaugurate the trade.
However, January 1848 saw everything change when gold was found in Coloma, California. One of the first places to get wind of the news was Oregon and by the end of the year, many of its residents had started flocking south to seek their fortunes.
Pacific Mail’s steamships were suddenly in demand by passengers – which increased further when heavy snow blocked the overland routes. The company went on to seal its monopoly of the Panama – Oregon route in 1850, when it bought two steamships from its rival Empire City Line. The company also began a freighter service across the Pacific.
Expansion and Takeover
After opening a sea route to the Far East in 1867, Pacific Mail increased the frequency of its service and added newer and more modern ships. However, the cost of this expansion, coupled with the economic depression enabled Union Pacific Railroad to take over Pacific Mail in 1885.
In 1893, South Pacific Railroad took over the company – extending its service to include direct routes to Honolulu, Kobe, Nagasaki and Shanghai.
However, the opening of the Panama Canal in 1912 was a double-edged sword. While it presented opportunities for US shipping companies, railroad operators were banned from using the canal in a bid to prevent the formation of a monopoly. Pacific Mail was sold to Grace Line – which invested heavily in it. By 1920, the company had 46 steamers to its name.
However, Pacific Mail now faced competition from another steamship company Dollar Line. The Dollar family bought shares in its competitors – and by 1924, had managed to acquire Pacific Mail from Grace Line. By 1930, Dollar had succeeded in gaining nearly full control of the Pacific shipping routes.
American President Lines (APL)
However, in 1937, the Depression, and the losses from the wreck of one of its vessels took their toll – and Dollar declared bankruptcy in 1938. The US government took the company over and renamed it American President Lines (APL). As World War II broke out, APL’s fleet was converted to support the war effort – returning to passenger trade in 1946.
Planes (Trains) and Container shipping
However, things were about to change again. In 1952, APL was acquired by the Natomas Company – which wanted to investigate a brand new idea that promised to revolutionize international shipping – container shipping.
With passenger ships under a looming threat from another great idea – Pan American Airlines’ first passenger jet service – Natomas made the decision to convert APL’s operations to container shipping.
It was the right decision – by 1965 passenger traffic rates among shipping lines had halved and continued to dwindle as people took to the skies – while container shipping was rapidly becoming the dominant mode for shipping goods.
By 1979, Natomas had been acquired by Diamond Shamrock – which spun APL off as a public company in 1983.
Neptune Orient Lines
In the meantime, the Singapore government had been looking into starting its own shipping line. With no experience, Singapore asked for help from the government of Pakistan – requiring an expert to advise them on the formation of a shipping company.
Captain Muhammad Jalaluddin Sayeed, an Indian sea captain was selected and helped the Singapore Government with the founding of Neptune Orient Lines (NOL) in 1968.
However, as an inexperienced newcomer to the Far East trade, NOL faced many difficulties in gaining its share of the trade – until companies such as Lee Rubber, Tropical Produce and Ang Woo Liang reluctantly started to ship with it.
Fortunately, NOL had the support of the Singapore government, which supplied capital and loans. NOL finally became profitable in 1975, despite a slump in the shipping business, largely due to improvements made by its managing director Goh Chok Tong.
With containerization taking off, NOL started to accept containers on its conventional ships but felt constrained by its size and trading limitations.
In 1975, NOL joined forces with OOCL, “K” Line and Franco-Belgian Services to form the ACE consortium – rapidly known as the “third force” in the container-shipping world. The group was soon offering weekly services between the Far East and Europe – and broke into the lucrative trans-Pacific route between Asia and the US.
NOL buys APL
However, it wasn’t until 1997, when NOL made the US$285m acquisition of APL that it made the news around the world. The deal, which more than doubled NOL’s size and put it amongst the top five in the industry worldwide was the largest ever made by a Singapore company. With APL now its major container shipping brand for customers, NOL had a complete “around the world” operation.
However, the Asian economic crisis hit hard. NOL saw losses mount to US$460m in 1998, while its debt was more the US$4bn. The company sold off assets to clear the debt – and by 1999 was profitable again.
Following further slumps between 2000 and 2009, NOL focused on reducing costs and protecting existing revenue streams.
But did you know….
- William Henry Aspinwall also founded the Panama railroad and Panama Canal.
- Upon retirement, Aspinwall founded the Society for the Prevention of Cruelty to Animals as well as New York’s Metropolitan Museum of Art.
- The Dollar Line had a practice of naming its ships after American presidents – an idea the US government approved of so much when it took over the company that it renamed it American President Lines (APL)
- NOL was the first, wholly government-owned company to be listed on the Singapore Stock Exchange. Today, NOL’s major shareholder with a 68% stake is Temasek Holdings – the investment arm of the Singapore Government.
- NOL’s managing director Goh Chok Tong famously went on to become Singapore’s second Prime Minister.
Today, NOL is still one of the top five shipping companies in the world, offering ocean shipping and container transportation services as well as logistics services, primarily serving the electronics, high tech, retail, consumer and industrial sectors.