As a tumultuous year in container shipping ends, there is hope that we may be able to build a more sustainable model that averts the traditional peaks and troughs of supply and demand that have impacted the industry in recent years.
In terms of the global economy and trade looking forward to 2018, we are quite optimistic in general as both the US and European economies are improving, and we expect a corresponding uptick in trade. Commodity prices are also getting better and stabilizing; countries that rely on exporting raw materials now have a better outlook. Though the trade multiplier of GDP has lost its impetus, we are still looking at a multiple of 1.5-2.
The container shipping sector appears to have reached the end of its current round of consolidation, and the corresponding number of shipping lines has been reduced, it gives them a breathing space to adjust their long-term strategy and plan for the future.
However, despite calls for a halt to building more mega-vessels, there are indications that the orders will continue to roll in. Currently, there are 140 units of box ships with a capacity of more than 10,000-TEU on order with shipyards; this accounts for 70 percent of the total number of orders. This will pose operational challenges to some terminal operators as they will have to retrofit cranes and reorganize container yards to accommodate the larger vessels.
The industry would undoubtedly benefit from improved communications between the carriers and their supply chain partners. An open discussion is urgently needed within the industry before there is another round of mega-ship building. The benefit of economies of scale only works if the ship is loaded to near capacity, and, unfortunately, that is often the optimistic assumption many carriers make when they decide to place another large vessel order.
From a shipper’s perspective, there are now fewer choices in the global carrier sector as a result of alliance reshuffling and the reduction in the number of carriers. But on the flip side, it will bring more stability to the ocean freight sector, and shippers should have greater “peace of mind” that their carrier partners will have financial stability.
We are cautiously optimistic that the industry has turned a corner toward longer-term economic sustainability, but only genuine collaboration between all supply chain partners will ensure that happens.