Annual Review and Outlook

With the current uncertainty regarding tariffs, free trade agreements (FTAs) and foreign trade zones (FTZs) provide companies with the tools to help mitigate unexpected increases in their cost structure.

The general volatility of the global market is currently having and will continue to have the biggest impact on the logistics industry throughout 2019.

As we attempt to ensure our graduates keep up with the changes in technology and regulations, we must not lose sight of the fundamentals of seamanship, navigation, marine engineering, safety, and security that licensed officers are expected to demonstrate.

I look ahead to 2019 with a great deal of optimism about the West Coast waterfront.

Strategic planning and investments remain the key elements ensuring Florida is prepared to service larger, new-Panamax vessels, as well as smaller vessels that serve the Caribbean.

Shipowners and operators are deciding whether they should go for low-sulfur fuel, scrubbers, or liquefied natural gas.

Two matters will disproportionately affect the maritime shipping industry in 2019: ongoing international trade negotiations and the alarming increase in the number of advanced cyber attacks waged against the global shipping supply chain.

Substantial investments that market participants are making in vessels, equipment, infrastructure, and talent will amplify the impact of “value add” for customers.

I fear escalating disputes such as that between the US and China could derail economic recovery, reshape global maritime trade patterns, and dampen the future course.

In the world of ports and cargo, transportation technology is already helping us overcome the challenges presented by growing container volumes.

2019 is ushered in with a variety of new influencers accelerating change in the current chassis environment.

We expect the MPP/HL market to further solidify in the next year, yet some risk remains through the slowdown of world economic growth and potential delays of some project-related investments.

Integrated solutions that provide a level of total supply chain management are increasingly sought by customers, who are looking beyond ocean transport services alone to operate most efficiently with dependable, fast, and seamless services to support their supply needs and optimize inventory management.

As we continue to grow, planning the needed capital infrastructure improvements to maintain our tenet of top level customer service and investing in our people and technology is paramount.

While larger vessels have, in many ways, been a response by the shipping companies to a challenging set of transportation economics, it is now becoming clear that retailers and consumers are driving the next phase of transformation in the ever-evolving shipping industry.

Companies this year will be faced with many challenges related to hiring.

For those involved in maritime education and training, 2019 will bring challenges and opportunities on several fronts.

There is plenty of activity in the digital arena with new platforms coming online regularly.

2019 is the gateway to a gigantic shift in global shipping — the coming 2020 low-sulfur regulations.

One of the biggest changes as we enter 2019 is ratification of the United States-Mexico-Canada Agreement (USMCA), which maintains strong trilateral partnerships.

Uneven economic growth and uncertainty over trade policy make the outlook for containerized cargo difficult to predict.

The emphasis on high-quality service may well be the tipping point to persuade a customer to choose one carrier over another.

If it takes paying more to give the carriers and truckers the ability to improve service, I believe it is what we need to do.

The rush of technology entering the trucking industry is occurring with one important, consistent theme: It will only be as good as the professionals who power it.

Airforwarders Association members view the upcoming year with general optimism but with the understanding that potential headwinds including higher fuel costs, increasing interest rates, and import tariffs could adversely impact cargo volumes in the upcoming months.

Global trade and the many direct and indirect stakeholders that take part in supply chain delivery execution have been responding to and managing change for decades, perhaps even centuries.

2017 was yet another year in which many in the maritime industry realized the need to run as fast as possible just to stay in place. Cost pressures continued to plague the industry in 2017 in spite of the fact that it appeared to be a year of relative recovery with growth in volumes and freight rates in some of the major global trades. However, overcapacity still looms large with the renewal of mega-ship ordering and its potentially negative impact on the market.

There was an unexpected pickup in global trade for the period January-September 2017, with CTS figures that we have not seen for a considerable time. Volumes were 5.44 percent higher than year over year. These growth figures are well in excess of the 1.0 to 1.5 percent times GDP growth that was discussed as the new “norm.” Many carriers reported profits in the third quarter of 2017. The stability provided by alliances, as well as consolidation in the industry, helped the carriers provide capacity more in line with seasonal trends. All three major longhaul trades showed growth in the first nine months of 2017: Asia-North America growth of 8.84 percent, Asia-Europe growth of 5.3 percent, and Europe-North America growth of 7.51 percent. This growth helped substantially to fill the stream of capacity that is entering the container trades, and created a situation where ships in excess of 20,000 TEU are expected to become the norm on Asia-Europe; ships of 10,000 TEU to 15,000 TEU will not be uncommon in North American trades. This, in turn, has led to the cascading of larger vessels into the north-south trades. This has been facilitated by the opening of the expanded Panama Canal and has led to many of the previous Panamax vessels being scrapped earlier than expected, with vessels as young as 8 years old being sent to the breakers. Ports and inland infrastructure have been challenged by handling larger volumes of containers on a single ship, partly a result restructured shipping alliances. The prospects for 2018 at this stage look good, even if the growth rates are slightly lower than we have seen in 2017. There could be problems with Brexit, and potentially with imports into the United States as the Trump administration has declared its intention of bringing manufacturing back to the US. The impact of these events in 2018, however, will probably be limited. Another potential problem the industry could face is the influx of new very-large container vessels into the major trades. This could mean more capacity than is needed, which would affect rates and carrier revenue.

2017 saw the results of the previous year’s consolidations of liner carriers and the transformation of the alliance structure and network designs that followed through the year. This eliminated the mystique and brought some sense of predictability to the industry. Services that support the liner industry, such as terminal operators, railroads, truckers, and other landside operations, could finally plan and contract out work based on the routes and vessels deployed on them. In 2018, we will see more structure to the announced plans to integrate the likes of the three Japanese carriers, Maersk and Hamburg Sud, and possibly some development of the Cosco and OOCL merger. So the ink is not dried yet as more changes to liner routes and vessel deployments are forthcoming. Furthermore, we can see signs of profitability by some companies now reporting and a much more positive outlook being predicted by liner executives. All good signs. Another positive trend we saw in 2017, and are sure to continue, is the effort of some carriers to change old habits by offering enforceable contracts. We know that five of the major liner carriers are now offering this type of arrangement, and cargo owners (the smart ones) are accepting this as a way to do good business. Last year, I mentioned that the relationship between carriers and cargo owners had to change. Commitments by both sides have to be met. I am encouraged what I’ve seen so far, and I believe this will continue in 2018 and greatly enhance transparency in the contracting process, leading to profitability of the carriers. So for the first time in quite a few years, I’m optimistic that 2018 will continue with positive news. We have a labor agreement in place on the West Coast, and are working toward a similar agreement for the East and Gulf coasts.

Shipping is now adopting technologies that have rapidly changed other industries, bringing the advantages and challenges of digitization. The introduction of new tools for carriers and cargo owners has been slow by some measures, with regulatory and international barriers affecting their implementation and return on investment. These barriers seem unlikely to change in the near future, and technology has and will find ways around those obstacles.

There has been massive transformation in the global supply chain in the recent months. Consolidation, mergers, and new alliances have led to a fundamental realignment of an old-fashioned shipping business. The number of players has been drastically cut. Cost-saving initiatives and further deployment of larger ships require physical on-docks and off-docks infrastructure to cope with increasing demand for investments and limited growth of volumes. Beneficial cargo owners have benefitted from depressed sea freight tariffs, but want to be reassured about the reliability of liner services. It is a complex time for carriers; for so long, they have been at the center of world trade driving global growth, but today door-to-door logistics is driven fundamentally by information technology. In the US, 2017 online sales will surpass sales at general merchandise stores with Amazon reaching $165 billion in turnover by setting the benchmarking of the “click-to-door delivery time” to 3.5 days. In China, online retail purchase and delivery is even more pronounced. Online sales of consumer goods, by transactional value, were set to be 10 times greater than those in the United States; One Belt One Road initiatives are playing a crucial role. In this dynamic scenario, opportunities are arising, driven by increasing demand for improved risk management along the supply chain, with southern European ports gaining traction as alternative gateways to serve the central and eastern European markets.

The overall trade outlook for Canada enjoyed a positive uplift after the Comprehensive Economic and Trade Agreement came temporarily into force on Sept. 21. The trade deal was inaugurated by Canada’s international trade minister at Montreal’s new Viau Container Terminal, signifying the symbolic role of Montreal as a natural North American gateway for European trade.

In the trans-Pacific, we await larger and larger vessels as they begin to cascade out of the Asia-Europe trade, replaced by even bigger ships. For those of us in the port business, long-term planning and significant investment in landside infrastructure is critical in order to efficiently accommodate these mega-vessels.

Collaboration, information sharing, and transparency are some of the key areas that, as an industry, we must do more of to deliver a better service for our customers. With more collaboration between terminals, container lines, warehousing and distribution providers, shippers can benefit from a better end-to-end service by reducing operating costs, and making significant short-term savings for long-term competitiveness.

As the only deep-water port on the US-Mexico border — serving as a major international conduit in and out of both countries — we remain very watchful of the ongoing North American Free Trade Agreement negotiations.

In North Carolina, we remain bullish on international seaborne trade in our region.

We will see a further embrace of technology as a means to mitigate marine terminal congestion and facilitate cargo transportation. While the technology is not new, certain sectors may have been slow to recognize its value in streamlining cargo transportation. Most notably, technology has been deployed in the form of enhanced information portals that provide real-time information over the internet on container availability, booking status, and vessel schedules and truck reservations systems.

Everyone has grown accustomed to so much variety — delivered daily courtesy of the nation’s seaports — that a single glitch in the transportation network or supply chain system can dominate headlines for weeks.

One of the most detrimental changes in regulations would be the weakening, or repeal, of the Jones Act.

The consolidation of the ocean container shipping industry into less than 10 major companies is further evidence that the trend to deploy large container ships to US ports will continue. In 2017, we saw the first deployment of a 13,000-TEU ship system to the US East Coast. We expect multiple such ship systems on the US East Coast by May 2018, while the dominant vessel size will be in the 8,000-TEU range.