Drewry shares a few insights on current state of ocean shipping

“With the peak season now starting, other carrier consortia will likely not need to reduce capacity, at least until the peak season ends in about October."

By ·

As the 2M Transpacific partners begin cutting back on service,  “overcapacity” is again to blame, but some prominent ocean shipping analysts take issue with this contention. Philip Damas, head of Drewry’s Supply Chain Advisors, notes in an exclusive interview that carrier capacity decisions are driven by trade profitability, ship utilization and other factors. 

“Asia-to-U.S. ship load factors had dropped to just 85% in recent months, so the decision of 2M carriers Maersk and MSC to discontinue a loop was justified from a carrier viewpoint,” he said. 

At the same time, however, this move was “unfavorable” for the shippers who relied on this particular loop for their operations, added Damas. 

“With the peak season now starting, other carrier consortia will likely not need to reduce capacity, at least until the peak season ends in about October,” Damas said.

According to Damas, “cutting back on service” is not just about providing available ship capacity and equipment, but also quality and reliability of the overall service.

“The recent survey of  shippers run by the European Shippers’ Council and Drewry showed that there has been a deterioration of carrier customer service since 2016 and that shippers are less satisfied with the carriers’ level of service than they were before. This is an ongoing issue,” he noted. 

He was also critical about recent bunker fuel surcharges, observing that carriers announced nearly identical new fees. He said that some shippers regard this as “price signalling” – a term used to say that a competitor is communicating proposed price increases to other competitors, who can then respond even without direct discussions.

For Damas, the most critical issues facing ocean carriers for the remainder of the year are to regain profitability and stop cutting customer service as a cost-reduction measure. 

“The two go together,” he said. “But the finances of most ocean carriers now are poor, based on Drewry’s 'Z score' of financial strength. From a shipper’s viewpoint, the risks are that some carriers could discontinue their services or slot down their services to reduce increasing fuel costs if their losses worsen.”

Finally, said Damas, “a related risk” is that the rapid consolidation of the carrier industry is reducing the number of providers and could eventually push up prices, as has happened in the U.S. passenger airline business.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [ protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

Drewry · Global Logistics · Logistics · All Topics
Latest Whitepaper
Are Your Profits Taking a Hit in This New Retail Environment?
This whitepaper aims to provide a better understanding of whether it might be a solution for your retail supply chain operations.
Download Today!
From the September 2019 Logistics Management Magazine Issue
For me, September is the time to make a fresh start. It’s the beginning of new school year for the kids; a new college and professional football season ramps up; and, of course, conference season for nearly all professions is about to get into full swing.
IMO 2020 is Coming to Town: Will the spiking cost of fuel cause you pain?
Cold Chain/ Food Logistics: Setting the standard for cold chain
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly newsletter!
Latest Webcast
The State of Rail/Intermodal Markets. Volumes are down, but the future looks bright
In this webcast, our panel will provide a comprehensive update on the current state of the rail/intermodal markets and offer an in-depth look at the pain points shippers have been experiencing (service challenges, precision scheduled railroading (PSR), rates, capacity management) and offers shippers advice on how to prepare for the Q4 2019.
Register Today!
Masters of Logistics 28th Edition: Find your digital direction
Given the number of available and emerging digital solutions capable of transforming and improving...
36th Annual Quest for Quality Awards: Winners in the spotlight
Which carriers, third-party logistics (3PL) providers and U.S. ports have reached the pinnacle of...

State of Logistics in 2019: What’s next?
Tight capacity, high rates, rapid e-commerce growth and a booming economy fueled an 11.45% rise in...
Got labor? How supply chain companies are recruiting talent during a labor crunch
How are companies faring in the race to recruit and train high-level supply chain talent in a market...

Наш важный веб сайт , он рассказывает про анастрозол www.ka4alka-ua.com
Наш полезный веб сайт с информацией про купить бутсы адидас start-sport.com.ua