The Sad State of Affairs
Over the past year and a half, the shipping industry has experienced big changes that may affect the rights of maritime workers, the laws protecting them, and the companies that employ them. The economic slumps in the EU and China have affected the container shipping industry in massive ways. The regulations that have governed this industry for ages have had to change in order to survive the times. China’s imports have dropped 19% and their exports are down 13%. These economic concerns have prompted a new way of pricing shipping costs. Before the price of a container was determined by the contents of the container. That is no longer the case, now container ship carriers are more concerned with filling the ship to the utmost. This is impacting the shipping industry in some serious ways, but there are things that can be done to get the shipping lines back on track.
There are other factors that have contributed to this tidal change. The oversupply of containers coupled with dropping fuel costs and the 208 new ships that entered the market in 2015 have increased the competition greatly. Furthermore, these current shipping industry trends are laying the groundwork for a big loss for most shipping companies. In the past 12 months, in most major trade lanes, we have seen the lowest rates since 2009. This is crippling the industry at such a rate that it is projected that there will be a $5 billion loss in 2016.
Mergers: Pulling the Industry Apart
The Cosco (Chinese shipping and logistics services supplier company) and CSCL (China Shipping Container Lines) merger is awaiting approval from the EU and US regulators. After said approval is passed, Cosco and CSCL hope to align with the Evergreen OOCL and CMA CGM to form an east-west alliance to challenge the present market sovereignty of Maersk and MSC 2M vessel-sharing agreement. This will most likely result in even lower shipping rates. The 78% drop in market average price since July 2014 and the 82% drop over the same period for the market low are indicative of the dire straits the shipping industry is in right now.
A Change Has to Come
As the focus has shifted from the type of cargo being shipped to just being able to fill containers on a ship, the concerns over the well-being of the shipping industry are heightened. As McKinsey & Company found, there does seem to be a glimmer of hope for a positive turnaround in the near future. They identified some systematic changes that need to be implemented to increase efficiency for companies and turn negative trends around:
1. Procurement – Reducing terminal costs by improving their relationships with the terminals themselves, by combining their respective team’s efforts.
2. Market Analysis – To help lines understand intermodal costs for the purpose of establishing the correct pricing structure in order to lower the cost of ownership when prices are at their lowest.
3. RFQs – Requests for Quotes force the practice of review of total costs, which can lead to very useful insights into the market. This will help to forecast dry containers’ cost and use that data to leverage more informed decisions for new purchases and negotiations.
4. Asset Utilization – Stowage planning and container-fleet management can benefit from new software that is available to create a “cockpit” to help develop smart metrics and use them to run a more efficient fleet.
Righting the Ship
Although the shipping industry is experiencing some tumultuous times right now, there are options for improving the processes and the current way of viewing success within the industry. It seems like most industries in the new millennium have made changes in their processes. In order to stay relevant and successful there may be some soul-searching in terms of how they view our goals and success in the container-shipping industry, and how maritime lawyers may be able to interpret these changes as they impact the workers on these cargo vessels.
