Global container shipping is an essential service to facilitate globalization, yet it is estimated that container shipping lines will lose $10 billion this year. While this contradiction has a lot to do with slowing growth in world trade and big ship deployments, it has mainly to do with a fragmented industry structure — too many carriers chasing a finite amount of freight. The industry is embarking on a recovery phase, driven by significant consolidation, which should restore equilibrium by 2020. This is good news for all who rely on this industry. One dominant theme in this recovery is the formation of three mega-alliances, allowing the efficient deployment of very large container ships in east-west trades.
For major US container ports, the two major challenges are to sustain and improve operating performance, while making the large investments required to handle large ships and increasing volumes, albeit more slowly. The latter has to be done in an environment where the mega-alliances freely discuss a “deflationary terminal rate environment.” Public ports are integral to the US supply chain and will need to earn proper returns to maintain this investment thesis. Harbors have to be deepened, new equipment must be purchased, and terminals must either be expanded or new ones built. Managing these dynamics in what is predicted to be a more mature trade environment is the key issue facing the US port industry.
Equally, reliable operating performance is critical for the supply chain. Ports need to manage their operations to make this a reality, not wait for others to tell them how to do it.