{"id":2126,"date":"2015-12-15T13:30:23","date_gmt":"2015-12-15T18:30:23","guid":{"rendered":"http:\/\/flevy.com\/blog\/?p=2126"},"modified":"2015-12-15T15:20:19","modified_gmt":"2015-12-15T20:20:19","slug":"how-can-we-fix-the-shipping-industry-lets-think-outside-the-box","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/how-can-we-fix-the-shipping-industry-lets-think-outside-the-box\/","title":{"rendered":"How Can We Fix the Shipping Industry? Let’s Think outside the BOX!"},"content":{"rendered":"

\"shipping\"The current status quo is that the shipping industry\u2019s cycle is not synchronized with global economy\u2019s one. As a consequence, the ratio between demand and offer for sea transportation of containerized cargo is bringing shipping line\u2019s revenues even below operational expenses on the majority of the trades. Shall we start panicking? No, maybe we should simply start to change our perspective.<\/p>\n

Arguably, when years ago massive investments for mega cellular ships\u00a0have been decided, there was not only hope but also certainty about a healthy recovery of the world economy. This, in turn, would have brought to an increased derived demand for maritime transportation, stronger freight rates and huge profits for those shipping companies able to have their super-efficient, mega vessels at sea by 2013-2014.<\/p>\n

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However, as we know, something went wrong, and unfortunately it is still going wrong. Something unpredictable happened, something able to inhibit the expected synchronism between the shipping cycle and the world economy\u2019s one. More specifically, a chain of events bogged down the world economy. First of all the stall of the Chinese growth, secondly the implosion of the Southern European and North African economies, then the stagnation of other BRICS economies, just to mention a few.<\/p>\n

So what is going to happen within the container industry? The current scenario appears to be very gloomy, with (almost desperate) IPOs (Hapag-Lloyd) and not very convincing M&As (CMA \u2013 NOL), shares\u2019 value plunging, balance sheets turning to red, and massive layoffs (Maersk).<\/p>\n

\"\"<\/p>\n

Furthermore, just to hit the last nail on the coffin, technical and geopolitical factors (related to resources accessibility) might bring the oil barrel up to $ 60-80 by the end of 2017, despite recent OPEC\u2019s skirmishes. This will not only push more to the right global economy\u2019s recovery but also increase shipping line\u2019s operational costs.<\/p>\n

Common sense would suggest that this is the perfect set-up for one of the\u00a0worst\u00a0<\/strong>bloodshed in the history of the container industry, where competitors, due to the increasing imbalance between tonnage and\u00a0cargo, will\u00a0fight for cargo volume, no matter how much shrinking freights will jeopardize their profitability and \u2013 in the end \u2013 shipping lines\u2019 own existence.<\/p>\n

\"\"<\/p>\n

My personal point of view is slightly different: this is going to be the\u00a0best\u00a0<\/strong>bloodshed ever for the container sector. You can bet on the fact that less cash-solid and efficient company either will be acquired or liquidated after going out of business, but this will be the survival of the fittest. The day after tomorrow will see less shipping lines in the market, probably fewer alliances but for sure a healthier and more balanced industry. In turn, the world economy will benefit from a rejuvenated and leaner container sector.<\/p>\n

The issue is now to guess which players we\u2019ll continue to be in business after this shipping catharsis: beside political and geopolitical interests, the key factor will be the ability of shipping company\u2019s leaders to make a difference in terms of knowledge, timely decision making, courage and stamina. As the Latin saying quotes \u201cmala tempora currunt, sed peiora paratur,<\/em>\u201d we are going through tough times, but the worst is yet to come: a solid hand at the helm is paramount to the get out of the storm. Only those companies, which have been able to nurture and retain consistent mid, senior and top management ranks will survive in the middle term and prevail in the long one.<\/p>\n","protected":false},"excerpt":{"rendered":"

The current status quo is that the shipping industry\u2019s cycle is not synchronized with global economy\u2019s one. As a consequence, the ratio between demand and offer for sea transportation of containerized cargo is bringing shipping line\u2019s revenues even below operational expenses on the majority of the trades. Shall we start panicking? No, maybe we should… How Can We Fix the Shipping Industry? Let’s Think outside the BOX!<\/span><\/a><\/p>\n","protected":false},"author":75,"featured_media":2127,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[82],"tags":[915,1007,1006,1005],"class_list":["post-2126","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-operations","tag-brics","tag-container-industry","tag-maritime","tag-shipping-industry"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/2126","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/75"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=2126"}],"version-history":[{"count":1,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/2126\/revisions"}],"predecessor-version":[{"id":2128,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/2126\/revisions\/2128"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/2127"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=2126"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=2126"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=2126"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}