- Maersk Line to Cut 4,000 Jobs as Market Deteriorates – WSJ
- Drewry: ‘Grim’ Outlook for Global Container Shipping Industry – Journal of Commerce
- World’s Commercial Shipping Fleet Grew at Lowest Rate in 10 Years in 2014 – Supply Chain 24/7
We have all seen the headlines in the WSJ, analysts reports, logistics websites and blogs. What does the downturn in the ocean shipping industry, purchases of triple E vessels by the commercial shipping fleets, recent mergers and expansion of the Panama Canal mean for shippers?
No doubt the commercial ocean shipping companies are struggling. Commercial shipping fleets grew by 3.5 percent in the last year. That is the lowest growth rate in a decade according to the UNCTAD Review of Maritime Transport 2015.
The average vessel size for all new vessels on order by the top 15 commercial shipping companies is above 10,000 twenty-foot equivalent units, which is double the current average size of vessels in the existing fleet of each company. Very few companies outside the top 20 carriers have placed any new orders and these orders are for far smaller vessel sizes.
The downturn has enabled consolidation in the market – mergers of Compañía Sudamericana de Vapores and Hapag Lloyd, and Compañía Chilena de Navegación Interoceánica and Hamburg Süd. This has increased the container carrier capacity per provider but decreased the average number of companies that provide services to each country’s ports.
By early 2016, the massive Panama Canal Expansion Project is expected to double the Canal’s capacity, creating a new traffic lane that will allow more ships and larger vessels to access the world’s most famous oceangoing shortcut. This will save the larger vessels 8,000 miles bypassing the trip around Cape Horn at the tip of South America. The project will add new locks, one on each of the Atlantic and Pacific sides, with three chambers with water-saving basins. The $5 billion-plus project will also include newly excavated channels to the new locks, as well as widening and deepening existing channels.
All these activities create opportunities for shippers to sit down with their providers and discuss the use of new shipping lanes, rates and capacity commitments. Looking forward into 2016 and 2017 does it make sense to consider East Coast ports with the Canal expansion and larger capacity ships? Or as a risk mitigation for West Coast port disruption? Securing future shipping capacity should be in the shippers favor for the next few months.