Wednesday, March 19, 2014

'Interesting Times' for Ocean Carriers

Long Beach conference focuses on challenges faced by maritime industry.

There is an ancient Chinese curse that says “may you live in interesting times.” These are interesting times for the business of maritime cargo.

Shipping line executives and industry analysts shared their thoughts on where the industry is and what lies ahead on the seas at the Journal of Commerce TPM Conference in Long Beach earlier this month.

Carriers have been on a shipbuilding spree, ordering more and bigger vessels, even as demand and container rates slumped in the aftermath of the Great Recession. Along with bigger ships, the carriers have sought to band together, creating and expanding alliances in an effort to stanch the red ink of approximately $15 billion in losses since the 08-09 recession.

The mega-ships, meant to cut fuel costs and increase efficiency, and slow steaming are attempts to end the hemorrhaging, return to profitability, and gain some measure of control, which has shifted to shippers as the capacity glut unfolded. Deployment of these 10,000-18,000 TEU, or 20-ft. equivalent unit ships on the Asia to Europe lane has shifted many “smaller” ships carrying only 10,000 containers at a time to the Trans-Pacific run.

Another notable example of cost slashing in the last two years has been the carriers’ abandoning their traditional practice at U.S. ports of offering chassis for containers their ships carried. This has contributed significantly to the unprecedented congestion at ports including those of New York and New Jersey this winter.

With all the turmoil in the ocean carriers’ world, things may not calm down any time soon. At the end of next year, the newly-expanded Panama Canal is scheduled to open for business, handling much larger ships than before. This has already set up a scramble as ports along the U.S. East coast upgrade their facilities to handle the larger vessels, and will keep the seas turbulent for years to come.

But there is another Chinese saying, to the effect that every crisis brings with it opportunity. Are you ready?

Kirk Shearer
1-800-989-0054 x103

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