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As we review news and events relating to ocean shipping, we feel it would be interesting to point out events or trends that we feel have some importance. Here are some items that we think will have a fairly significant effect on the ocean cargo industry.
Alliances, Mergers and Acquisitions
This example is just an event some are worried that this could be a trend. Maersk lines, the world’s largest ocean container shipping company recently announced that it is forming an alliance with the two next largest competitors. This move should improve efficiency and flexibility as the shipping companies can pool resources and optimize logistics. On the other hand some view this as a threat with the alliance dominating some shipping lanes and driving prices up. It has been no secret that profits in this industry have been brutal as there is simply an over abundance of capacities. The shipping industries overall attempt to maintain pricing discipline has consistently failed. This alliance may be the start of a trend where other companies form alliances or merge. We have speculated in previous posts the shipping industry is ripe for some major shake ups as companies cannot continue indefinitely losing money while fighting an over-capacity situation. We believe that there are going to be a combination of mergers and bankruptcies that end up addressing the over capacity situation and eventually start driving prices up.
The Panama Canal Expansion
We have discussed this several times as we believe that the expansion will have wide impact on shipping logistics as more options become available. Essentially a significant amount of cargo that ports on the West Coast will end up going through the wider canal to ports on the Southeast and Eastern coasts. The results could include some significant shake up in the transport industry and lower shipping costs for customers. The expansion is due for completion in early 2015.
It’s no secret that the ice around the polar cap is melting. This phenomenon while having potentially disastrous environmental consequences is opening up the northern shipping lanes above Russia and the northwest passages above Canada. Up until very recently shipping by these routes was considered risky. Last year the number of arctic shipments quadrupled. The northern shipping route saves 10 days from the traditional shipping route from Asia to Europe which goes south and through the Suez Canal. Last year there were just 46 vessels that made the northern trek, this upcoming year that number is expected to be over 200. There are similar trends in the northwest passages off Canada. It is predicted that by 2050 the full arctic region could be open for shipping for part of the year. Being able to ship across the North Pole would shorten the shipping distance from the East North American coast to Asia significantly. Ice breakers and ships equipped to handle icy waters are still required, but opening up the northern waters for shipping even during part of the year could be a tremendous economic boom for parts of the world.
Mega Cargo Ships
Many of the new ships being built are super sized vessels. These vessels are not only almost twice the size of a typical cargo vessel, but they pollute less and are more efficient to operate. These new ships combined with some expected shake-out in the shipping industry could help solve the profit problems and add some stability to this industry. Low prices often are a double edge sword as businesses need to make money to continue to provide quality goods and services.
Packnet offers a variety of services for businesses that need to transport product across the seas. Starting with custom solutions that ultimately save you money and lower your risks, Packnet also will come to your facility and handle the entire crating and packaging. Packnet can help ensure that your packaging materials are compliant to international standards and that the crate labeling passes any port inspection.