Thursday, March 10, 2016

Ocean Carriers at Sea

Container shipping world buffeted by economic woes, megaships and port issues.

The world of ocean freight is as turbulent as seas in a tropical storm, with swirling cross currents and high seas roiling the waters – but we’re not talking about the weather.

Much like the world of longhaul trucking a decade ago, ocean carriers are undergoing a major shakeup, flirting with mergers or insolvency, and the ongoing, unprecedented weakness in the Chinese economy. Against a backdrop of continued weakness in cargo volume and profitability, shipping lines are dealing with high levels of debt, shifting alliances of carriers, a new generation of mega-ships, and the uncertainty of port infrastructure and labor relations in the U.S. to allow efficient movement of containers once they reach shore. And to keep things interesting, the long-awaited and delayed opening of the “new and improved” Panama Canal is really happening, scheduled now for May, although it will probably take several additional months before commercial changes in all-water services from Asia to the East Coast become clear.

The coming year will be marked by major changes in supply chain logistics in the trans-Pacific trades. Carrier mergers have begun, with the Feb. 18 announcement of the merger between Cosco and China Ocean Shipping Co. The previously announced acquisition of APL parent NOL by CMA CGM is moving forward and should be completed in the second half of the year. South Korean carriers Hyundai Merchant Marine and Hanjin Shipping face government pressure to merge following another year of steep losses. As these business relationships unfold, questions surround carrier participation in the four major vessel-sharing alliances. Significant restructuring is possible, involving at least the G6, Ocean Three and CKYHE alliances. Only the 2M Alliance of Maersk Line and Mediterranean Shipping Co. is not in play.

For beneficial cargo owners, the message is that they must be nimble in their cargo routing, and they must have close working relationships with ocean carriers, trucking companies, warehouses and railroads, to ensure BCOs have the transportation capacity they need where and when they need it. Having your widgets manufactured cheaply in Shenzhen becomes less attractive if you can’t get them onto the shelf in Secaucus.

Kirk Shearer
800-989-0054 x103

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