The global economy is in the midst of a decade-long slow growth environment. World GDP is predicted to increase 2.8% in 2017, making this potentially the sixth consecutive year of sub-3% growth. As international shipping association BIMCO and other industry analysts have observed, maritime trade may not even benefit from what little growth there is. Any global GDP upturn will be driven mostly by service sectors, leaving the GDP-to-trade multiplier languishing in the doldrums.
After the game-changing political events of 2016, protectionist, populism and anti-globalisation sentiments are bringing significant new headwinds to international trade. Indeed, the foundations upon which today’s transnational supply chains have been built are now open to question. As Olaf Merk of the OECD’s International Transport Forum notes, “the outsourcing model that the world has come to know may have reached its limit” and so will no longer be underpinning cargo growth, particularly in container trades.
While multinational corporations account for only 2% of the world’s jobs, they manage the supply chains that account for over 50% of world trade. Yet staggering though this might sound, the share of trade accounted for by cross-border supply chains has actually stagnated since 2007. Add in today’s e-commerce driven ‘on-demand’ economy and emerging trends such as 3D printing, automation, digitisation, reshoring and OBOR, and the assumptions on which maritime container transport demand were founded over the past few decades look increasingly precarious.
For the container shipping industry, history may judge 2016 as a tipping point. Beside the shock collapse last September of Hanjin Shipping, the year saw the merger of COSCO and China Shipping, and the news that Japan’s big three carriers will come together. CMA bought APL, Hapag-Lloyd acquired UASC and Maersk bought Hamburg-Sud. Maersk also announced plans to knit its shipping, terminal and forwarding businesses into a digitally-driven global container logistics powerhouse.
Alongside the march of the mega-vessel, this huge ongoing rationalisation has major ramifications for shippers, ports and terminals and other supply chain stakeholders. Not least of these is the brand new shipping alliance ecosystem that will now take shape in the first half of 2017.
Ports and terminals worldwide face escalating risks from the perfect storm of slower global growth, larger ships and ocean carrier consolidation. Investment in infrastructure, equipment and automation is costly and, in many cases, slow-moving. How can they protect themselves from revenue squeeze, obsolescence and the risk of being cut out of fast-changing carrier networks? Can a fixed port be a responsive business?
Some analysts, including Drewry, argue that port and terminal consolidation is now inevitable to cope with the new realities of container shipping. Others add that ports and terminals must look to the hinterland and tie themselves much more strongly into multimodal cargo logistics networks, building new relations and revenue streams with shippers, 3PLs and other landside supply chain members. Certainly, the challenges of handling peak off-takes from mega-ships have already brought shippers and terminals together to a far greater extent than previously. Digitisation and automation are set to play a vital role in securing new revenue, cost savings and greater efficiencies.
Is the port and terminal business model set for some fundamental change? Indeed, does the same apply across the whole container supply chain? Recent news that both Maersk Line and CMA CGM have signed deals with China’s online giant Alibaba presages interesting times ahead for business relationships, roles and revenue in the new digital global container trade economy. Add in the announcement that CMA CGM and COSCO will leverage the Ocean Alliance to “reinforce their strategic cooperation on port operations and investments”, plus strong moves by terminal operator groups including DP World into logistics, and the traditional demarcation lines between shipper, logistics provider, carrier and port start to get very blurred.
And that’s before even considering the plethora of new disruptive digital players out to reshape “business as usual.” That includes a raft of new ‘click and collect’ ocean freight booking platforms, and Uber-like truck capacity management initiatives from non-conventional players such as Amazon, which is increasingly focused on logistics and transport.
Moving from Uber to OBOR, the Eurasia trade landscape is starting to transform itself by land and sea, with investment pouring into new transport infrastructure, including coastal and inland ports. The re-emergence of Iran onto the trade stage adds a further dimension. How will these new trade corridors and clusters reshape the status quo and how can investors, operators and technology suppliers take advantage?
This landscape forms the backdrop to TOC Europe 2017. Having witnessed countless upheavals in its 40-plus years, three core content components at this year’s event will bring industry executives up to speed on how maritime logistics and container supply chain operations can face up and adapt to the challenges ahead.