Compared to historical incidents, container shipping seems remarkably resilient, with shipping lines now savvier at balancing supply and demand than before. This time they swayed it in their favor through very rough seas (fluctuating volumes), establishing a foundation where they can reap the benefits and rake up profits. Could this be a turning point? Will we ever see the low pre-COVID-19 rate levels again?
This year we have also learned that supply chains are slow. Shutdowns in one place of the world impact the rest, with cascading effects that take a long time to repair or normalize. 2020 could mark the end of companies’ appetite for single-sourcing and the beginning of an increased focus on contingency plans and supply chain resilience. This may change, somewhat, the balance of global flows of volume to other regions than the Far East.
With respect to getting the capacity they need at a reasonable price, shippers need to learn that there isn’t any such thing as a “reasonable or unreasonable price.” It’s all just market prices. Shippers need to adapt to the best sourcing strategy according to current and future market conditions.
Whether it’s appropriate to drop the annual contracting process in favor of -shorter-term service agreements depends on far more than an appetite to change. It depends on which trades (front- or backhaul, north or south, etc.) budget requirements, employee resources, risk, predictability, and so on are involved. Ideally, shippers would maneuver between different contract durations at different points in time, depending on what is most favorable relative to current market conditions.
Besides making headway on how liner shipping will become less of a burden on the environment, the container shipping industry is now challenged to find some sort of equilibrium of supply, demand, and equipment availability after a rocky 2020. The industry must be prepared to deal with a market state that doesn’t have “exploding” volumes. As we are on the cusp of getting a COVID-19 vaccine, consumption may get back to something of a normal state as we start again to spend on travel and other services. This could bring down the volume of durable and nondurable goods to be shipped. At the same time, the effects of unemployment caused by the lockdowns will start to be felt as governmental support packages will soon get pulled or dry up in many countries. This will also tighten the buying power of goods, further decreasing shipping volumes. Such abrupt and unpredictable changes in a fast-paced market, coupled with slow-moving shipping vessels, make planning in the container shipping industry extremely hard.