I am fortunate to be able to travel the world and speak to importers, exporters, 3PLs, steamship lines, and many others associated with the industry of international trade and logistics. Listening to perspectives, discussing industry changes, and sharing intelligence through open minded discourse is an omnipresent element of the logistics arena. We can all agree that changes are obvious and looming. A continuation of the trend toward consolidation in the steamship line sector is the most obvious item, as the number of individual lines operating shrinks.
The overcapacity issues and slower-than-expected trade volumes exacerbated by the China slowdown have plagued the industry, and mounting losses led to necessary shifts. The relative shock of the Hanjin bankruptcy had real dollar impacts on many shippers, and the most common question we have been asked in the last few months relates to mitigation of risk and cargo insurance clauses.
In 2017, we will work through our contract negotiations with fewer players and different alliances. We lived through this in 2014, and I foresee a similar process in the 2017 round. As the lines work through their new mergers and acquisitions as well as formulate their alliance structure, uncertainty and caution will prevail. All of the steamship lines want and need upward movement in the rates, but until the market stabilizes, it is unlikely that dramatic shifts will occur. For the shippers, the number of services will be squeezed into fewer, but larger, silos, thus analyzing partnerships and limiting risk will be key factors.
Despite market upheavals and consolidation, we still honor and count on relationships. We work with the individuals that can quickly respond, and whose companies can carry out our service needs. While the word commoditization haunts the industry, the differentials in service levels drive our decision-making on both global and regional levels.