2020 State of Logistics: Ocean Cargo

Container shipping lines’ ability to provide cargo space as needed showed a marginal improvement at the start of 2020, but this gain will have been dramatically reversed by the end of the first half of this year, according to the fourth annual shipper satisfaction survey of Drewry and the European Shippers’ Council (ESC).

The survey, run jointly by the ESC and Drewry, reveals that the 227 shippers and forwarders who took part rated the service of container shipping lines with an average score of 3.2 on a scale of 1 (very dissatisfied) to 5 (very satisfied).

“Drewry foresees that the next ESC-Drewry survey will show growing concerns among shippers for three specific areas of service quality: availability of space and equipment; reliability of bookings; and carriers’ financial stability,” says Philip Damas, head of the logistics practice at Drewry. “These are key factors of carrier and forwarder selection, particularly in today’s disrupted market, but also in the next year when ocean-borne volumes recover.”

The level of satisfaction for 16 different carrier service and cost criteria reviewed in the survey was found to be diverse among respondents. Satisfaction with clarity of prices and surcharges, transit times and quality of customer service in 2019 ranked lowest—with scores of 2.8 to 3. Satisfaction with availability of cargo space provided in 2019 ranked higher, at 3.3, and improved from the 3.2 reported in 2018.

In fact, shippers and forwarders now see availability of cargo space as the most important criterion of carrier service, and, according to Damas, that improvement in availability in 2019 was a welcome development for the industry. However, following the coronavirus outbreak, some 281 Asia-Europe and Asia-North America sailings have been canceled, and availability of cargo space has decreased dramatically.

“This is a market with volatile capacity, where liners remain price setters and keep freight rates high despite very low fuel indexes, while they can only plan in the short term themselves,” says Godfried Smit, secretary general of the ESC. “Our view is that shippers will benefit from shorter-term contracts, and by either diversifying their carriers’ selection pool or by concentrating more on financially healthier or government supported carriers.”

Shippers and forwarders also maintain that carrier performance has deteriorated between 2018 and 2019 in four areas: the range of different available carriers; the range of different available services; the price of service; and the overall carrier service quality. However, carrier performance related to sustainability and carrier financial stability has improved since 2019, according to respondents.

Earlier this year, AlixPartners drew similar conclusions in its “2020 Global Container Shipping Outlook,” noting that the ocean carrier sector’s finances were made even more vulnerable by the current coronavirus epidemic.

According to Esben Christensen, global co-leader of the transportation and infrastructure practice at AlixPartners: “Carriers could see their hard-fought financial gains of recent years totally evaporate if they fail to control costs, including how they manage fuel costs and customer expectations around fuel costs.”