2016 ends a year of major events that have resulted in significant market disruptions, including a major ocean carrier’s declared insolvency, continued deployment of very-large container ships, and actions by ocean common carriers to expand market control through consolidation and new alliances in an effort to return to profitability.
Once thought too big to fail, Hanjin Shipping declared insolvency on Aug. 31, 2016. The shock was felt throughout the industry as the cost of the carrier’s demise was widely distributed across the international transportation community, from delayed cargo deliveries resulting in missed sales for cargo interests, to the costly recovery and return of the hundreds of thousands of containers that were on lease to Hanjin.
A thorough post mortem review of the Hanjin demise will likely occur this year as the numerous transportation segments that were adversely affected look for new tools and processes to avoid or minimize the financial impact, should another failure occur.
The emergence of the ultra-large container vessels has magnified the interdependence of transportation service providers and the resulting disruptive changes to the transportation system that are required to accommodate this new class of vessels.
According to Drewry, the deployment of ULCVs has resulted in a reduction of vessel operator costs of up to 25 percent for the largest ULCVs as compared to the 8,000-TEU workhorse class. However, other parts of the supply chains have seen a collective increase of 20 percent in operating expenses to handle the mega-ships, which nets a modest 5 percent overall cost savings to the trade. Additional savings potential may be possible through improved productivity and throughput.
As we enter 2017, optimism grows that the ability for existing supply chains to accommodate the increased demand placed on them by the ULCVs, and the potential service changes by the three global vessel sharing alliances, will be achieved by greater collaborative efforts among the industry segments, resulting in success for the overall international transportation industry.