While Hanjin's August 2016 bankruptcy recedes in the rear view mirror (unless you still have cargo being held hostage in a Hanjin container in a number of smaller Asian ports); what can we reasonably expect in 2017? And how are the shippers, traders, and forwarders affected by shipping alliances? Here is our forecast.
There are now three major shipping alliances. Make sure you check out our infographics we posted recently on the 2M Alliance, THE Alliance and the Ocean Alliance. Although the membership in only one of the three alliances remains unchanged. While carriers switch and swap like children playing with Legos, so long as there is some 30% overcapacity of containers-to-cargo, does it make much of a difference?
Related reading: What Are The Profit Margins In The Shipping Industry?
Container Shipping Market Trends
The 2M plus H
Maersk and MSC continue to dominate, and now they've got Hyundai Merchant Marine's strong Asian connection feeding their Megas. On Sunday 11 Dec Maersk and Hyundai announced Hyundai would be entering into an exclusive cargo-sharing agreement with the 2M that involves slot purchasing. Additionally, Maersk will assume the charters for five HMM vessels, which will be a financial relief for HMM's creditors and shareholders, while Maersk's COO Soren Toft mentioned how Sunday's agreement will enhance the 2M's presence in the Trans-Pacific trade. If HMM's financial condition improves during the 3-year agreement, HMM will join the 2M as an equal member.
The Ocean Alliance
Consists of CMA CGM – OOCL – China Cosco – Evergreen. Both China Cosco and OOCL will be receiving 20,000+ TEU Mega's beginning 2017, increasing their mega fleet. However with Mr Trump threatening a trade war with China, filling those megas might prove problematic as the EU's continued economic weakness preclude their picking up additional Chinese exports.
Forecast: Partly cloudy, with a chance of political storms.
Hapag-Lloyd – MOL – K Line – NYK – Yang Ming
MOL – K Line – NYK agreed to merge; which formed the world 6th largest shipping company, while both Hapag-Lloyd (due their acquisition of UASC) and MOL will receiving additional 20,000+ TEU Mega's beginning 2017, adding to their existing mega-heavy fleet. In a sign of the times, the Alliance members have set up a 'catastrophic instrument' between themselves that will allow the members to successfully deliver the cargo-containers of any Alliance member that goes bankrupt. Both Yang Ming and K Line were members of the CKHYE Alliance with Hanjin, and both suffered huge loss of reputation as their irate clients found boxes they'd booked with K Line and Yang Ming had been placed on Hanjin vessels and were seized, arrested, or otherwise delayed. It seems the flight to safety shippers sought for their shipments following Hanjn did not include many shipments on other than Maersk or MSC.
Forecast: Partly cloudy, as they compete against the Ocean Alliance for cargo out of Asia.
Zim is the remaining large independent, and they seem to be transforming themselves into a Med-US service...which must compete against the 2M.
Forecast: Continued cloudy, as too many containers continue to chase too- few cargo.
Container Shipping Industry Outlook 2017
2017 promises to be an interesting year. From Brexit to the incoming American administration, it seems the prevailing sentiments are not too pro-trade. Should the nativist trend continue, the current problem of too many containers versus too- few cargo will continue, and THE Alliances 'catastrophic instrument' may well be tested. The Flight to Safety may very well continue.
[VIDEO] Container Shipping: 2016 A Year-in-Review
Cargo Shipping Outlook 2021: Container Transport on Rise
It seems that even though the cargo market is seeing grim days, that will not always be the case. According to the report "Cargo Shipping Market - Global Trends and Forecast to 2021", the growth in container transport will have highest growth in cargo shipping trade compared to other types of cargos (Liquid, Dry, General).
After the fiscal year 2018, the report states that the cargo shipping market is projected to reach 12.52 Billion Tons at CAGR of 3.5% from 2016 to 2021overall with the container market the most promising.
Globalization Driving Container Growth
Not surprisingly, demographic changes and the increased globalization drive the growth for container transport. Additionally, the investments in port infrastructure, global supply & demand cycle will have positive impact on container transport.
A few weeks ago we saw the new Panama Canal opening, which will seemingly garner more trade from the Pacific to the North America East Coast. At the same time, some North American ports like the East coast Port of NY/NJ got themselves ready and received the 10K TEU, MOL Benefactor, on July 8th after it sailed the first voyage through the newly expanded Panama Canal.
Developing countries are producing more, slowly but surely, making their way from being labeled "developing" into exporting nations. This, of course, all adds to more cargo. The report states that Asia-Pacific and the high number of developing countries in that area is the largest market for cargo shipping trade.
Factors That Can Hault Recovery
Of course, even though globalization is deemed to drive growth, there are certain factors that can affect container transport and ultimately prices. We have speculated what effect Brexit can have on global trade and freight rates. We also have speculated what the Panama Canal expansion will really do for trade coming from Asia to North America and a possible further doom to shipping prices. How does the issue with overcapacity, mega ships, alliances and the rest of the lot come into play? We don't know at this point, but we find it interesting to look at historical rate data in Xeneta and future rates coming in and decipher some of the container shipping market trends.
Shipping Prices Overall on the Up Through Q3
In our recent Webinar, Q2 2016 Shipping Rates at a Glance, we saw in the Xeneta platform that overall there is a increase in the spot market for the Asia-North Europe route. We also see long-term rates following that upward trend. While the North American counterpart is still trending downwards.
We hope that the container market does indeed trend upward through 2021 like this Cargo Shipping Market reports states. A slumping container market isn't good for anyone.