Last year saw a wild ride for the container sector with a number of major players choosing to ‘sell and consolidate’ over pending bankruptcy and Hanjin Shipping being earmarked as the world’s biggest ever shipping collapse. As always, over capacity was the core problem, driven by market disruptions which included both political and commercial impacts such as the unforeseen drop in the price of oil, Brexit and “MEGA-ship madness”. Poor strategic planning was also another factor in an industry known for its ‘casino mentality’, egged on by export bank guarantees, shipyard discounting and massive equity funding from people who often knew very little about ships and shipping. In summary, the perfect container shipping storm.
Market reports are that despite a significant amount of container tonnage still in lay-up, the oversupply tide is turning as now redundant and quite young Panamax ships of 8,000 TEU and less go to scrap. As noted above, consolidation has also been the name of the game with CMA CGM’s purchase of Singapore’s container flagship operation NOL being a notable event, along with Maersk’s purchase of family dynasty company Hamburg Sud. Major container alliances – including THE Alliance, Ocean Alliance and 2M – have now been re-formed and terms agreed to start operation in April 2017. So have peace and better times come to container shipping along with relief for MEGA-port investors?
The indications are positive subject to the ability of the alliances to keep their members under control on price and their ability to elicit user fee increases without raising shipper howls of cartel-like behaviour in protest. The other big issue will be to avoid new MEGA-ship orders in a world where filling up a 20,000 TEU ship has already proved to be a serious economies of scale problem. Maersk’s solution seems to be to buy in as owner/operators to the feeder market as well. The ‘wild cards’ are of course the independents who operate outside the alliances and thereby have the opportunity to be very disruptive in terms of both box rates and services. We shall have to wait and see but SeaProf’s bet is that the alliances will prevail.
Turning now to ports, there seems to be no end to announcements of better times ahead in terms of both the bulk and container handling along with multiple new investments in MEGA-port facilities. Can it all be justified? Facts and figures contained in a new infographic from recent analyst startup Xenetashow projections for significant increases in Asian trade and transport as China searches for new sources of low cost factory labour. The associated game changer will be the steady shift of both China’s and India’s market economies towards a more than a doubling of personal consumption to 2035 as their populations grow increasingly richer and better educated. Good news for ports and their investors, subject sensible ‘return on equity’ investment and the avoidance of grandiose, politically based ‘white elephant’ projects “Malaysia’s recently announced Carey Island port facility?”
Other ‘good news’ factors that lie ahead include the massive potential for the further incorporation of both ship and port automation in relation to planning and operation. The other exciting developments include digital ‘block chain’ data handling (effectively incorruptible) and service and equipment requirement predictability through big data analysis. Indications are that although the technology is already there, the current maritime usage uptake is still quite low. As such, there is a massive potential for huge improvements in both ship and port operation efficiency and transport service sales along with significant cost savings and increased net returns. Readers might like to check out two short videos on this subject by Dr. Inna Kuznetsova, President and COO at INTTRA, a world leading ocean shipping software service provider.
The SeaProf/BI Norwegian Business School’s ‘Key Elements of Shipping Course’ scheduled for 21-23 March 2017 at the Amara Hotel, Singapore. One of our long serving Key Speakers is Associate Professor, Dr Jasmine Lam, a port development and management specialist who also heads up NTU’s martime education department. Dr Lam is well known for her numerous published papers on the subject of ports. She is also engaged as a port consultant by the PSA and MPA as well as overseas corporations seeking to optimise their port investments and efficiency. Dr Lam’s research focus is on ‘future ports’ and she will be providing a comprehensive overview of this subject and its critical impact on Singapore and the Asian Region.
Please check out the full details in the KES course brochure , as well as the generous MCF training grants and PIC cash rebates that are available to eligible participants. For an easy to understand summary, see our Net Fees Calculation.
Don’t miss the KES boat and an opportunity to see and discuss the future of shipping and ports!