The Asia / Europe trade lane
So, what does 2016 hold for the shipping industry? A very challenging outlook would be the best synopsis.
2015 was difficult but carriers were able to take some solace from a positive 1 st quarter, coupled with a significant drop in bunker prices. Had this not been the case, then the dismal results for the 4 th quarter would have had an even bigger impact on overall operating profits.
The starting point for 2016 has not been anywhere near as strong on the key Asia / Europe trade and, as we move towards the end of the 1 st quarter, rates on the trade have already dropped to near all-time lows .
Even the slight spike in demand for Chinese New Year could do nothing to prevent rates dropping like the proverbial stone.
New tonnage being introduced to the market, coupled with a considerable drop in demand ex China, has seen carriers left with no option but to slash rates as they look to attract bookings to fill their new vessels (many of which have capacity in excess of 18,000 TEU.)
In fact, the entire equation used to justify the construction of these vessels in the first place appears, for the foreseeable future, to have gone out the window. Fuel efficiency and reduction in slot cost, due to economies of scale based on 85% + utilisation, seem currently impossible to achieve with many lines reportedly nearer 70 – 75% utilisation.
So what next? Whilst the current landscape is great for importers who are enjoying a prolonged period of low rates, in the long term, this is not sustainable and something must give.
To put current rates in to perspective, the price being paid in many instances on the spot market to ship a 40’HC container from Shanghai to Felixstowe, some 13,000 + miles, is actually less than a rush hour train ticket from Manchester, to London Euston, for example!
Carriers cannot survive at these levels, and certainly cannot maintain the number of services and frequency of sailing many have become accustomed to, with a reported 230 sailings cancelled in 2015.
The trend of cutting sailings, or omitting ports with little or no prior warning, looks set to continue as carriers desperately look for measures to soak up excess capacity. Of course, these actions can throw supply chains into disarray and lead to additional costs for importers that are perhaps not so easy to substantiate with production or deadlines being affected and end customers being let down.
In fact, the idol fleet is at its highest since the economic crisis began, with a reported 357 vessels currently laid up equating to over 1.5 million TEU in capacity. Included in the list is a newly built 18,000 TEU Triple-E vessel which Maersk will lay up for 6 weeks.
CMA have also announced plans to move their 18,000 TEU vessels from Asia / Europe onto the more profitable transpacific trade.
Mergers and new shipping alliances
The next 12 – 18 months will be very interesting, in terms of the overall landscape of carriers with mergers and new alliances all gathering pace.
CMA have all but done the deal to acquire APL which will see them become the 3 rd biggest player in the market with a combined 2.3million TEU capacity behind Maersk & MSC.
MSC & Maersk look set to continue with their 2M alliance.
It looks increasingly likely that the two Korean carriers (Hyundai Merchant Marine and Hanjin) will merge given the reluctance from the Korean government to offer any major support; meaning the merger, looks to be the best option for both. That said, recent reports suggest the clock is very much ticking for Hyundai Merchant Marine to find the solution!
The Chinese government has made the move to have Coscon & China Shipping merge, with the proposal being for China Shipping to drop out of the container market to focus on tanker operations, ship owning, and leasing, and for Coscon to take the lead in the container shipping market.
In turn, the newly merged Coscon & CSCL are in talks with Evergreen, OOCL & CMA CGM about the possibility of forming a new mega alliance to rival the 2M. Consequently, this calls the G6, CKYHE & Ocean 3 alliances into question.
We see many in the market-determined to win the race to the bottom, in terms of price, and we have lost bookings this year to competition for the sake of a few pounds. This is, of course, disappointing but is a by-product of the current market dynamic. However, for me, this gives little consideration to the service attached to it and the chances of establishing a long-term relationship.
How John Good 日博电竞app官网 is tackling the freight forwarding challenge head-on
Given the market challenges, for us as John Good 日博电竞app官网 entering our 183 rd year of trading and still as an independently owed family business, we can take great pride in our recent success and sustained growth. This has been recognised by our inclusion and shortlisting in the ‘ Growing Business Awards’ , the ‘Real Business Hot 100’ , the London Stock Exchange’s ‘ 1000 Companies to Inspire Britain’ and the ‘Ward Hadaway 2015 Fastest 50’ .
We have diversified and have strong foundations as a group across three key sectors namely shipping & logistics, warehousing & distribution and corporate travel. Therefore, we are well placed to manage the current challenges manifesting themselves within the shipping industry.
Our focus, more than ever, must be, and is on, the customer experience; developing close working relationships & partnerships with our customer base and suppliers alike.
Whilst we appreciate that price is important, we do not want this to be the deciding factor in working with us.
By looking at ways to add value where ever possible and taking a consultative approach by looking for a ‘best fit’ for individual clients needs, we have the best chance of securing customers for the long term, and in doing so, securing our long term future as a family business.
Ultimately, our customers are judged on their ability to get their product to their customers. Whether that is import or export, there are many links in the shipment chain. Having a 日博电竞app官网 company you can trust, who understands your business and requirements, is vital and should not be underestimated, particularly in an ever-changing market.
We see the continued investment of our IT infrastructure as key to our future success and continued development.
Embracing technology to secure operational efficiencies; moving towards the management of shipments through milestones and reporting by exception, coupled with the ability to interface, will allow the delivery of bespoke solutions, in terms of technology, that meet the increasing complex demands we see from clients.
Whilst market conditions are challenging, we have plenty of positives to focus on. We are extremely confident in our abilities to both retain customers and develop strong partnerships with suppliers whilst still securing new opportunities that will facilitate our continued growth in the years ahead.
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For more, please visit: https://goodlogisticsgroup.com/