Breaking through container shipping doldrums

Breaking through container shipping doldrums

If the mood at this month’s 18th Annual TPM Conference is the lodestar for the container shipping industry, then there is definitely something happening.

It is not full-blown optimism but more a shift in the type of conversations being had and a realization about what can be changed and what cannot. For there is not much more to say about the trans-Pacific supply-demand imbalance and the downward pressure it puts on contract and spot rates. The forecast from Alphaliner tells the tale: the eastbound capacity expansion of 8 to 9 percent will outpace demand expectations of 5 to 6 percent.

“In short, you might say we’ve been focused too much on freight rates, and not enough on service,” said Graham Slack, Maersk Group’s chief economist, emphasizing that shipper demands for visibility and data analysis are becoming a critical issue that the market must address.

From rising protectionism underscored by President Donald Trump’s attack on steel and aluminum imports, to a new reality for US surface capacity, there are new challenges for shippers and transportation providers that demand action rather than hand-wringing. “We could be at a defining moment,” said Tom Behrens-Sorensen, chairman and CEO of Behrens-Sorensen Advisory P/S. “A trade war could take growth significantly down, if it is not nipped in the bud.”

Soaring rail and truck rates also are shifting the trans-Pacific service negotiations away from water to land. "The certainty of being able to get the freight inland, to service the ramps, the last-mile delivery, that’s what we’ve really got to focus on," Ocean Network Express CEO Jeremy Nixon said.

The tech reality — is container shipping at a crossroads?

That sense of the industry being at a crossroads explains the accelerated interest in technology and interest in new voices and unconventional approaches. In encouraging the industry to look outside for answers, DB Schenker CEO Jochen Thewes said during his keynote speech that the industry has “been shielded for quite some time from really radical change and disruption. In my opinion, that time is up.”

The industry is waking up. How else would one explain a packed session with standing attendees lining the walls for a panel on blockchain?

But technology is only part of it, as it requires a fresh look at conventional dynamics. Beyond acquisitions, partnerships increasingly will link forwarders, technology companies, carriers, and even competitors, Thewes said. “Maybe we even need to collaborate with competitors. I could see investing in shared charging stations for trucks. We’re not competing around the network of gas stations, are we?”

There is also the temptation to look at technology as the savior rather than a driver of change. Pete Mento, vice president of global trade and managed services at Crane Worldwide Logistics, warned attendees that digitalization has reduced the relationships that are pivotal when things go wrong.

For non-vessel-operating common carriers “and freight forwarders, this is a business built on chaos. Things go wrong with documentation and paperwork. And the individuals who are doing the work for you, actually there managing their relationships with the government, are more important than ever before. There’s no app for dealing with an FDA [US Food and Drug Administration] problem. I wish there were. These relationships are more important than ever, but are we building them?”

The industry also must do a better job of attracting new talent, and give women a clearer pathway to leadership. That first promotion to get into the pipeline of leadership remains a huge challenge, said Julie Abraham, director of international transportation and trade at the US Department of Transportation.

“Managers are often unaware that female team members are being overlooked,” Abraham said. “Women must speak up.”

Contact Mark Szakonyi at mark.szakonyi@ihsmarkit.com and follow him on Twitter:@szakonyi_joc.