LONDON, 05.09.2016 – Poor financial returns continue to plague the container shipping industry, with some analysts now expecting losses in excess of $10 billion for the year. The trend has worsened as 2016 has progressed with a huge impact on the entire reefer container transport sector, where suppliers and other key players suffer from lower volumes and presure to reduce costs.
In the short term, we are seeing this play out with the Hanjin receivership. Cargoes are not being delivered on time, sales are being lost, and this will all be extremely costly. Spot rates have increased in the aftermath.The Hanjin demise also affects trust in suppliers and I suspect many clients who have been greatly impacted – not least perishable shippers – will review their partnership strategies and risk profile for the future.
The Hanjin assets will remain in some form, so whether we will see a longer term positive impact very much comes down to shipping industry conduct. Would you rather be profitable at 90 per cent utilisation or chase the last market share points, which in today’s environment, in many trades, is in unprofitable territories?
Another key issue is the lack of growth. The new normal now seems below 3 per cent which will remain a big challenge, as the new vessel orderbook account for a 17 per cent increase over today’s fleet size. Not even increased scrapping of tonnage of a couple of per cent will do much to give an optimistic oulook for the coming 3-4 years.
Once stabilised, the recent mergers with CMA-APL, China Shipping-Cosco and Hapag with UASC will potentially give a more consistent product and pricing conduct. The reality is that customers can pay significantly more for their international transport as long as they are competitive in their own market, so I would predict that prices will come up, not least because carriers have been effective in reducing cost and really do not have too many other levers to play with to become profitable.
“It is good to see some of the reefer container market leaders showing creativity and innovation. One recent example is MSC with its new service linking Chile, Philadelphia and Europe with 9,000TEU high reefer plug vessels – great network design taking advantage of the wider Panama Canal and working with suppliers to make it happen”
Aside from the cost game, it is good to see that some of the reefer container market leaders are showing creativity and innovation. One recent example is MSC with its new service linking Chile, Philadelphia and Europe with 9,000TEU high reefer plug vessels. This is great network design taking advantage of the wider Panama Canal and working with their suppliers to make this happen. Another great example is Maersk’s use of GPS technology, which could be a game changer in terms of transparency for clients and operational excellence.
About Thomas Eskesen
Thomas Eskesen is the founder of Eskesen Advisory, a specialist consultancy advising executives in the refrigerated cargo and transport market on their business models and strategy. Until recently, he was Vice President and Head of Reefer and Special Cargo at Maersk Line, and led the company’s global refrigerated transport business for almost a decade. Thomas chairs the 2nd Cool Logistics Asia conference taking place 7 September 2016 in Hong Kong alongside Asia Fruit Logistica and Seafood Expo, ahead of the 8th Cool Logistics Global in Bremen, 27-28 September
About Cool Logistics Resources
Cool Logistics Resources Ltd. provides top-quality business intelligence and networking for supply chain, logistics and transport professionals in the international perishables markets. The annual Cool LogisticsTM Global Conference in Europe connects perishable cargo owners with cold chain logistics and transport professionals from around the world. CLR has also teamed up with Global Produce Events to run Cool Logistics Asia, a one-day high-level educational forum addressing perishable logistics and temperature-controlled transport, handling and distribution services across Asia, taking place alongside Asia Fruit Logistica. www.coollogisticsresources.com