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 ·

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

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!

Article Topics

Ocean Cargo · Ocean Freight · Trade · All Topics
Latest Whitepaper
Supply Chain Visibility: Illuminating the Path to Responsive, Agile Operations
Supply chain visibility is not an end, but a tool. It is the means to achieving true supply chain effectiveness, agility and ultimately, corporate profitability.
Download Today!
From the December 2017 Logistics Management Magazine Issue
Trade and transport analysts see rates rising across all modes in accordance with continued expansion of domestic and international markets. Economists, meanwhile, say shippers can expect revenue growth in transport verticals to remain in the 3%-plus range.
2018 Customs & Regulations Update:10 observations on the “digital trade transformation”
Moore on Pricing: Freight settlement and your TMS
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2018 Rate Forecast
Join our panel of top oil and transportation analysts for an exclusive look at where rates are headed and the issues driving those rate increases over the coming year.
Register Today!
EDITORS' PICKS
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...
2017 Alliance Awards: Recognizing outstanding supply chain partnerships
In an era where effective supply chain collaboration is both highly valued and elusive, Logistics...