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Ocean cargo in second half of 2012: challenges and opportunities

In a collective effort to stem the flow of eroding freight pricing, ocean carriers are now competing on the two major global trade lanes – EU-Asia and the Transpacific – by focusing on value rather than rates.
By Patrick Burnson, Executive Editor
June 23, 2012

All the major players are telling shippers the General Rate Increases (GRI’s) will not be jeopardized by competition offering deep discounts this year

In a collective effort to stem the flow of eroding freight pricing, ocean carriers are now competing on the two major global trade lanes – EU-Asia and the Transpacific – by focusing on value rather than rates. Indeed, all the major players are telling shippers the General Rate Increases (GRI’s) will not be jeopardized by competition offering deep discounts this year.

While no major multinational corporation wants to hear that supply chain expenses may soon escalate, there is an attractive aspect of this forecast, too. Ocean carriers – and the lead logistics providers who work with them – may rely on a sustainable level of capacity and service through 2012 beyond.

According to to Drewry’s Container Research – a London-based industry think tank – nearly 60 new vessels of at least 10,000 twenty-foot equivalent units (TEUs) are being staged for deployment. And while the active global ocean cargo container fleet has grown by less than 2 percent to date, analysts feel that it will expand more than 7 percent by the end of this year.

The major question, however, is whether the buying spree of last year will pay off. Overspending and rate cutting to win market share proved to be profoundly damaging strategies for all but a few ocean carriers.
Just how bad was it? Maersk – the world’s largest container line – reported a significant loss last year, along with France’s CMA CGM SA and Hamburg- based Hapag-Lloyd AG. Industry analysts blame frenzied bidding on the world’s two largest container-shipping trade routes.

According to SeaIntel Maritime Analysis in Copenhagen, the cost to the industry overall was a staggering $11.4 billion over the previous 14 months.
Nor were things much better for COSCO, the largest integrated shipping company in China and the second largest in the world.

Container shipping and related business moved volumes totaling 6.91 million TEUs in 2011, up 11.2 percent from the previous year. However, revenues from this segment were down 11 percent year-on-year.

About the Author

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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 .(JavaScript must be enabled to view this email address).


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Article Topics

News · Ocean Freight · Ocean Cargo · Trade · All topics

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