HOME     About us  |   News  |   Business  |   Trading Network  |   Knowledge  |   Download  |   Message
About Harvest

Ocean shipping set to be 'very different' in 2019, forwarder warns
Published:2018-12-30   Have been here 66   Source:泓威国际物流

Ocean shipping in 2019 is set to be “very different” compared to the current year, according to one major forwarder.

Anticipating the major trends in the segment over the next 12 months, Sri Laxmana, vice-president, Global Ocean Product, at US-based C.H Robinson, said ocean carriers are likely to put profitability above volumes next year which could result in more pricing stability and lower decreases in rates for shippers than in years past.

Smaller carriers could find it a struggle to compete which could result in continued consolidation or the need to join an alliance. Front loading and cost of carrying inventories will also be something most importers will be thinking about as the 'tariff war' (between the US and China) escalates while in the US 'choke points' and truck driver shortages wll continue to challenge the movement of containers beyond the port of arriva, he noted.

Focusing on market dynamics, Laxmana commented: "In years past, you could predict that if demand increased, so would rates; if the demand dropped, youyou could predict that if demand increased, so would rates; if the demand dropped, so would rates, regardless of whether or not it was profitable for the carriers. Today, we have fewer carriers, and they are very quick to withdraw capacity in a more uniform manner to ensure demand remains tight against available capacity.

"This results in rates that continue to remain high, on average. In 2019, overall capacity is projected to increase by less than 3%, but global trade is predicted to grow around 6%. So, this tells us with some certainty that carriers intend to keep supply tight against demand. The carriers would much rather deploy extra loaders as needed rather than introducing additional service strings. As we get into the contracting period, expect to see higher rates than we saw in 2018. One thing is for sure: having an attractive rate on paper will never guarantee  capacity moving forward".

Turning to US-China trade tensions,  Laxmana said that while the situation has eased with the 90-day delay in the imposition of higher duties, the dispute was far from over.

"Besides front loading their shipping to avoid tariffs, importers are accelerating supply chain diversification by moving toward Southeast Asia. While this does not solve the problem, their actions definitely show a desire to diversify as much as possible from China.

"This is critical because of the way service strings today operate from Southeast Asia. While there are direct services from South East Asia’s main base ports, there is still a fair amount that transships. With higher demand from Southeast Asia and no appetite on the part of carriers to add more service strings, the dynamics of how carriers operate their vessels in 2019 and beyond could change.

He added that Brexit was also a cause for concern. As time passes, the complexity seems to increase and there is already talk of holding a second referendum. However this plays out, it should continue to shape how carriers operate and manage capacity in Europe".

Commenting on ocean carrier consolidation,  Laxmana questioned  the view that a peak had been reached  in 2017 and projected it could continue.

“A few carriers are rumoured to be heavy targets of consolidation. When analyzing their capacity and order books, it’s no secret that we will likely see some activity on this by the latter part of 2020. There are also several carriers that are still not within the broader alliance. They will need to evaluate their service strings and loading factors, since functioning as an independent carrier in today’s environment is almost impossible”.

As for their investment in third party logistics players, 3PLs, he said: “A few ocean carriers have revisited their strategies on how they intend to approach the markets; it is likely they will widen their offerings by more directly and deliberately investing in internal 3PLs or acquiring 3PLs. I suppose it’s become hard for carriers to ignore the growth 3PLs have had in the last few years. Instead of aligning with 3PLs more effectively and viewing them as an extension of the carrier’s network [most 3PLs are also non-vessel operating common carriers (NVOCC)], their acquisitions and investments in 3PLs could potentially create some friction. Most importers know all too well that 3PL neutrality will serve them better than having an in-house 3PL”.

Laxmana also highlighted the development of technology in ocean shipping, the significant investments of private equity groups into tech companies, and service offerings though a platform, having accelerated in 2018.

“Now, both 3PLs and ocean carriers compete in what has primarily been a 3PL space for smaller shippers and importers. While this can be considered a natural progression, don’t forget that almost half of bookings are still manual, and that almost half of invoices could be erroneous. These are basic and fundamental areas of improvement that really have not moved forward,

PRINT】 【CLOSE】 【TOP】 【Back to News list
Shanghai Harvest International Logistics Co., Ltd 
TEL:021 - 63244486 63078395 FAX:021 - 63244312  E-mail:jolie@harvest-log.com
Address:Room 712, Building 2, Shanghai Office Building, No.1250, North Zhongshan No. 1 Road, Hongkou District, Shanghai, China