Good News for Importers & Exporters – New Freight Tech
The container shipping industry had one of its worst years in 2016. In his Editor’s Insight, Nevil Gibson says a recovery is underway and that’s good news for importers and exporters. Nevil Gibson joins me now. How bad was 2016 for container shippers?
Well, it was the worst year since the global financial crisis that was back in 2008 to ’09. And the good news is that the World Trade Organization’s latest outlook indicator shows that turnaround is coming soon. It’s indicator sort of rises above or below 100 and it’s now sitting at 102.2 which is the highest since May 2011.
Now, if rates included in that indicator and the International Air Transport Association’s monthly figures which came out just last week they say that airfreight has also turned around a 14% increase in one month. And another thing is that freight rates, which fell as much as 19% last year, are starting to come back.
Another big block, so shall we call a shock to the industry, was the collapse of a major shipping line in Korea called Hanjin and that was stranded at the time when most European and American retailers are stocking up for Christmas. And the goods that became stranded were worth about $14 billion. So that’s how bad it had got.
When you say turnaround, does that mean there’s going to be more frequent shipping or as you mentioned they can lift their rates? And doesn’t that mean then that we are going to be paying more for our goods?
Yeah, there’s certainly a problem with the rates. Now with the rates falling as much as 19% basically a shipping lines are no longer profitable, and that’s why Hanjin went out of business.
But I’ve been talking to Maersk, which is the world’s largest container operator, and they say in the first quarter and followed by the second quarter this year, which hasn’t of course ended but ends in June, they say that capacity is being outgrown by demand and freight rates are expected to move up about 4 to 5%, and revenue and volumes are going with it.
But the main thing that’s hit the shipping companies in terms of profitability is that there’s been a big rise in the cost of fuel. And that led to a big loss by the company Maersk, for example, lost 32 million. But this year it expects, with those slightly higher rates and growing faster than capacity, that their profit this year will increase by US$1 billion.
Where’s the increased demand coming from?
Well, the local manager here who also looks after Maersk in Australia and Oceania says that volume’s already picking up between Asia and Europe, but also on the Asia Trans-Pacific routes. But out of Australia and New Zealand, it’s mainly food commodity exports and, of course, imports. Now, the dairy prices have been rising, but they’ve been showing higher volumes are expected by the end of the year.
But the big one that is impressing the shipping lines at the moment is the growth and the volume of apple exports. Also, you’re talking other produce such as onions and vegetables, that sort of thing, and also seafood.
And also, while the meat industry is in a bit of a downturn, demand from China for chilled lambs is continuing to rise, and this has encouraged Maersk to put on more of those giant container ships that only come into Tauranga, and this is also keeping costs down.
And a benefit for some exporters is that they’ve introduced a lot of new technology to refrigerated containers. You’ve got GPS tracking and monitoring, which means that you can tell what’s going on inside a container from anywhere in the world.
So that means that all the produce can arrive in perfect condition. And another thing improving the way goods are shipped around is the use of blockchain technology which is used for Bitcoin, and that’s replacing the enormous paper flow that follows all these goods and services around the world.
So what else is happening in the industry?
Well, the collapse of Hanjin actually sparked a burst of merger and takeovers, and Maersk itself is taking over Hamburg Süd which is one of its big rivals to New Zealand. That shipping line specialises in moving north to south. Other mergers have involved CMA from France with APL in Singapore. Two of China’s biggest carriers have merged.
Three in Japan merged. And Hapag-Lloyd, another big German company, has merged with a company in the United Arab Emirates. In addition, a lot of the companies are entering what they call vessel sharing agreements. These operate a bit like codeshares among airlines. And so they’re forming sort of relationships between countries to reduce costs. And Maersk, for example, has done one with Hyundai’s big shipping line in Korea.
Well, how will that benefit companies who want to move freight if there’s less choice?
Well, there’s certainly less choice in terms of the number of ships, but they’re getting bigger. And as they get bigger, they get more technology, and big companies can invest in it now. Maersk is actually part of a larger company called Møller-Maersk, and half of the company is involved in the oil business. So that’s going to be split off into a separate company.
Meanwhile, the Maersk operations which are mainly in transport and logistics, they’re going to be merging a number of companies there into a single, what they call a transport and logistics business. And that’s going to be pretty focussed on the technology I’ve just explained.
But another interesting deal, especially for locals here who buy and sell goods overseas or import them, is that they’ve done a deal with Alibaba, the big Chinese online retailer. And that means that, if you’re a registered user of Alibaba, you can buy space in a container, be it in or out of a country. That initially won’t be offered in New Zealand, but it’ll be here pretty soon.
Source: NBR Radio
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