Contact us

Carrier discipline key to healthy carrier economy. Carriers have no discipline.

 

RIM has been in business for decades and we’ve seen brands come and go in the steamship business. Sealand, P&O Nedlloyd, Neptune Orient Line (NOL), Hatsu Marine – the list of names grows steadily based on the number of years you count backwards.

Some were sold voluntarily, some were sold under duress, others filed for bankruptcy.

The point is that this is an industry that shippers rely upon to carry their goods to market, yet their profitability as a whole wildly swings from red to black based on the global economy and their own pricing foolishness.

News broke this week that finally, finally as it seemed there was some capacity discipline and rates were on the rise, more carriers committed to delivery of even larger vessels with even more capacity.

MSC reportedly confirmed an order for 11 x 22,000 TEU vessels, one of the largest orders ever in the containership industry. Not to be outdone, rival CMA CGM signed for six firm and three optional containerships of equal size to be delivered beginning in 2019.

Undoubtedly, there are economies of scale across nearly all industries. However, ever growing ships have an impact.

Port cranes much reach ever higher and even further across the beam of an increasingly wider vessel.

The “small” vessels of 12,000 – 14,000 TEUs, seen as the giants of their day not many years ago, are cascading into trades where this volume just doesn’t exist. The average age of containerships sent to scrap in 2016 averaged 3,500 TEUs and was less than twenty years old reports Mfame.

Larger ships mean additional capacity on key east / west trade lanes such as Asia – Europe and Asia – North America. Is this capacity that an economy the WTO revised upwards to 3.6% growth for 2017 can bear today and in the coming years? We all saw the effects of one bankruptcy – one alliance even went so far as to get FMC approval for a safety net should it happen again.

But what about shippers? Larger ships mean fewer sailings. Continued use of alliances to share space means fewer vessels in the trades. Is the goal of a tonnage arms race to further consolidate the industry to the advantage of the surviving carriers?

At RIM, we’ve been through these waves of consolidation. We sign contracts with multiple carriers to spread out not only our exposure, but also to offer the widest option of choices to our customers. We continue to negotiate the best possible rates on behalf of our clients while ensuring that the carriers with whom we work remain viable for our customers and their cargo.