Ocean carriers are running a business in which their reliability of completing voyages planned in advance ranges around 30% to 40%. The highest reported here, by Sea-Intelligence Maritime Analysis, is Maersk at 46%. How can you run a business with these kinds of service levels?
The answer seems to be, VERY profitably. Most ocean carriers reported billions in net income.
I like this graph from the article.
While the trend down coincides with COVID, service levels were not great even before 2019. It’s due to the canceled sailings and skipped stops that are commonplace today. Port congestion has not helped.
But we can see a significant number of firms changing their level of dependency on the scheduled services offered by the major ocean carriers and the alliances,. Large shippers are buying their own ships and containers, usually of smaller size, and choosing when their shipments are scheduled, where they go, and how they get to their warehouses. Even some forwarders and brokers have started doing this. Other firms are looking for brokers who can help them find ways to get their cargo on time.
I think the large carriers have to start looking at how to improve service levels. If it means smaller ships and frequent sailings that don’t get canceled, that’s what it will take.
Perhaps we need feeder ships to allow the ocean carriers to consolidate multiple loads onto their giant ships for long voyages, but offload them near the destination. Years ago Al Baird, an English maritime economist, wrote about offshore container terminals, that could be used with short-range feeders to relieve the wharf pressure on our landside container terminals of today.
New thinking is needed to improve carrier on-time reliability. It won’t come without effort and money. But we can’t keep relying on ‘someone else’ to brainstorm solutions and give them a try. Especially when we’re earning billions.
8 February 2022
Ports and Terminals, Shipping Lines
In December, Drewry published on their blog this article describing four significant disruptions likely to happen to shipping in 2022.
I feel these are right on target for the business, and will affect international shippers of all sizes, and intermediaries, such as brokers and freight forwarders.
I’m especially concerned with disruption in the resale of blocks of container space. Drewry’s discussion of MQCs (Minimum Quantity Commitments) indicates that contracts being tried out will require the MQC to be evenly spread across the year. This will be very hard for most forwarders to meet. While some of the business is of the level-quantity, just-in-time sort, lots of other shippers have seasonal blips in their demand. Those seasonal demands cannot be supported by regular fixed-quantity shipments; inventory costs would balloon, jeopardizing the business.
I’m using the word ‘seasonal’ in a time-series sense, not a climate sense; there is a lot of business that experiences ups and downs in demand, not related to weather, but to the needs of their customers. Clothing retail offers an example; summer wardrobes need to be brought in in early spring; winter clothes in late summer. Christmas tree lights and trees themselves are only needed in September-October to be ready for the Thanksgiving to Christmas buying period.
Smaller brokers and forwarders usually exist because they can provide special services to smaller shippers. They need to get access to space in order to help these shippers. Having to purchase on the spot market exclusively will mean that many small shippers will be handicapped.
But we cannot expect the brokers and forwarders to provide inventory consolidation services for the shippers who have these seasonal needs.
I recommend reading the brief article provided.
Drewry – Browse Recent Opinion Articles – New disruptions to supply chains in 2022 and how international shippers can respond
The World Bank says it will not back using LNG for marine transport. It says that LNG is a source of methane emissions, which are currently unmeasured but which could overwhelm any advantage in CO2 reduction created by moving away from heavy fuel oil (HFO). LPG-powered ships often emit some methane as they burn the Propane gas.
Methane is well known as a bad source of pollution. One source is from cows, such as those confined to feedlots. But there are many others, including flaring gas from oil wells, fracking gas operations, and landfills. Nowadays at some landfills, methane is captured— pipes are sunk into the fill and the methane pumped to a generating station, to provide energy to operate the landfill’s equipment. It’s a good fuel when trapped, and burned into hydrogen and oxygen.
LNG is the symbol for Liquefied Natural Gas, and it consists largely of methane.
The World Bank prefers green hydrogen fuel for projects.
Not everyone agrees. some of the pushback has started already. Something like 25% of the newbuild ships today are slated to be LNG-powered. Perhaps more engineering needs to be applied to those ships, to reduce methane emissions.