2016 State of Logistics: Ocean freight

Ocean shippers to keep expectations in check

By ·

A recent survey conducted by London-based Drewry Maritime Consultants confirms many of the findings contained in this year’s “State of Logistics Report,” but adds that ocean cargo shipper expectations may be modest at best.

Nearly half of the shippers who responded to the survey said that they expect volumes for the third-quarter peak season to be the same as they were last year, while another 35% anticipate lower volumes. Only 18% predicted higher volumes for container shipping’s busy period.

“The results of the survey confirm that international trade remains sluggish,” says Drewry analyst, Martin Dixon. “It will also be disappointing news to ocean carriers that are in need of a pick-me-up in another difficult and unprofitable year as well as to terminal operators, many of whom have under-utilized capacity.”

As noted in LM ocean carriers have taken the unprecedented step of removing capacity in key trades ahead of the peak season in a bid to support freight rates, suggesting their short-term demand forecasts were telling them much the same story.

While the ratio does vary trade-by-trade, the third quarter has generally been the busiest period for the industry, as retailers in the major consumer centers of the U.S. and Europe stock up on goods for the beginning of the school year and the winter holiday season. Between 2008 and 2015, the average proportion of annual world container volumes moved in the third quarter of those years was 26.3%, ahead of 25.4% in the fourth quarter.

“In a generally unpredictable market, this constant of knowing when the peak demand quarters will occur has allowed carriers to plan their deployment strategies accord¬ingly, in turn supporting rate increase requests,” says Dixon.

Drewry also notes that traditionally the third quarter is when carriers have been able to swell revenues through peak season, congestion and equipment repositioning surcharges. However, last year was “a non-event” in the high-volume westbound Asia to North Europe trade when the proportion of traffic only reached 25.8%, marginally better than the second quarter. “The peak was more evident in the Transpacific headhaul routes, but carriers will be wary of losing that predictability of volumes as it could reduce their ability to push through general rate increases and peak season surcharges,” Drewry adds.

Survey respondents opinion that the 2016 peak season will not bring much respite to carriers, with only 18% of all shippers expecting any sort of growth on last year. Drewry researchers say that the poor state of the global economy was cited most for the lack of optimism. Other respondents pointed to lower levels of re-stocking as a reason for their lower expectations, saying that they moved more goods earlier in the year than usual to take advantage of low freight rates. However, this appears to be a relatively rare occurrence, as 82% of shippers said that they haven’t altered their shipping patterns this year.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
Face security threats head-on. Protect data beyond perimeter.
Traditional Data Loss Protection (DLP) solutions present a number of serious shortcomings and challenges for companies deploying them, creating a clear gap in the market.
Download Today!
From the January 2018 Logistics Management Magazine Issue
Industry experts agree that costs across all sectors worldwide will continue to rise in 2018, and the most successful shippers will be those that are able to mitigate their impact on profitability. And, the right technology will play an increasingly vital role in driving efficiencies across the global logistics network.
The Future of Retail Distribution
Navigating the Reverse Supply Chain for Connected Devices
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
IAM, IoT and the Connected Supply Chain
There are three primary models of Identity and Access Management (IAM) technology that CTOs, CSOs, and Supply Chain executives are using to enhance their trading partner communities. While each leverages IAM and the IoT as core components only an “Outside-in” approach truly connects people, systems and things reliably and securely across the supply chain.
Register Today!
State of Global Logistics: Delivering above and beyond
Industry experts agree that costs across all sectors worldwide will continue to rise in 2018, and...
2018 Rate Outlook: Economic Expansion, Pushing Rates Skyward
Trade and transport analysts see rates rising across all modes in accordance with continued...

Building the NextGen Supply Chain: Keeping pace with the digital economy
Peerless Media’s 2017 Virtual Summit shows how creating a data-rich ecosystem can eliminate...
2017 NASSTRAC Shipper of the Year: Mallinckrodt; Mastering and managing complexity
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships...