This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
Following a long preparation period, the new IMO 2020 regulations will soon be ready. The impact on the industry cannot be underestimated. It was clear from the onset, formally declared by most major carriers, that the increase in fuel cost cannot be absorbed by the carriers who have no margins to allow for it. Thus, the fuel cost unavoidably will be reflected in the total customer cost.
While this aspect of the shipping industry is pretty much clear-cut, in view of the many uncertainties still prevailing in the markets, the overall global outlook for 2020 is far from clear. Significantly, the China–US trade friction makes it difficult to make predictions. Similar uncertainties undermine other major trades as well. The business environment remains volatile and challenging, while commoditization pressures remain unchanged. Carriers will need to take a more all-encompassing view of the supply chain. They will need to enhance their value-added services in order to differentiate the services they offer to gain a competitive edge. Ultimately it needs to start with people and a paradigm shift.