The Global Crisis of the Shipping Industry: What the Data Predicts
Last year has been challenging on global trade and the shipping industry has seen unprecedented demand and volatility. No amount of preparedness would have been enough to counter the crisis that’s expected to go up to 2022.
Countries such as Thailand and the Maldives took a significant hit due to their reliance on travel. Meanwhile, countries and companies that ship essential products saw growth. On the other hand, massive shipping companies like Maersk and DB Schenker shuffled their strategies to account for the increased demand.
In this article, we’ll look at the data behind the state of shipping and logistics in 2021, as well as what that data can tell us about said the industry in the near future.
Let’s jump right in.
Top 5 Shipping Industry Predictions for 2021 and Beyond
The International Maritime Organization (IMO) and entities like the UNCTAD (United Nations Conference on Trade and Development) work toward helping achieve sustainability and better internal trade.
However, due to the coronavirus pandemic, the global shipping industry was affected more than any organization could counter. There was a need for a new strategy to prevent a financial crisis in the shipping industry.
The global economy, exporters, importers, and other stakeholders are all trying to make the right decisions when it comes to freight.
There has been a significant change in how shipping companies operate, how buyers make decisions, and the overall cost of shipping.
Here are the top five predictions for the future of the shipping industry.
1. Freight Rates Will Stabilize (But Not Immediately)
According to maritime data, freight rates have reached an all-time high in recent times. However, data also suggests that once the global maritime logistics framework stabilizes, shipping prices will go back down. They’re expected to go down around 17%, considering that’s the average yearly change.
Maritime transport has seen higher rates now, so it’s unlikely that the rate will return to what they were, pre-COVID. Still, there are a few things that will need to get sorted before freight rates can stabilize.
- Vaccine rollout, viral waves, and COVID variants may make it harder to stabilize.
- Shipowners and shippers may need to adjust their containerization processes to cater to increased demand. A greater number of companies are willing to use shared containers rather than one TEU (Twenty-foot Equivalent Unit) per order.
- Figure out long-distance sea transport processes. For example, the process a cargo ship would have to go through if they were to come from Los Angeles to Asia. The process would revolve around Covid-based procedures to minimize risk and stoppages.
- Proper utilization of bulk carriers, container ships, and the introduction of new ships.
- Globalization has given rise to different forms of freight, such as trucking. However, you can’t transport via truck from North America to Asia. That’s where the maritime industry, container shipping, and air freight come in.
2. Shipping Companies Might Procure Additional Vessels
When the pandemic initially hit, the demand growth of ship orders took a massive hit. However, now, the demand growth has outstripped the mega-ship orders from shipping companies.
Many shipping companies have put in orders for new ships because prices were low. However, at this point, it’s all about catching up to the demand.
3. The Industry May Welcome Blockchain
Last year has pushed the shipping industry to complete digitization to make the supply chain easier while making global trade more efficient. That’s why companies may start introducing Blockchain technology and applications.
Integrating it with the documentation framework would make things faster and leave little room for error. Other than that, it enables the automatic operation of maritime smart contracts.
It will lead to more cost-effective mechanisms with increased transactional cost savings.
4. Steps Towards De-Carbonization
Global green initiatives are pushing the shipping industry to adopt de-carbonization, especially after IMO 2020. Currently, the majority of ships are powered by LNG (Liquefied Natural Gas), crude oil, or bunker fuel (Heavy Fuel Oil). All of those produce massive emissions, especially when you consider the size of global international trade.
Even one greenhouse gas is bad enough, and that’s why ships are expected to move towards hydrogen-powered propulsion systems and solar power.
5. Less Port Congestion Via New Technology
Heavy port congestion is a major problem that has plagued the shipping industry due to port backlogs, especially after the first lockdown.
However, port congestion can be reduced by leveraging technology such as sea-faring data collection, as well as smart, low-cost nodes. Additionally, blockchain technology can help streamline maritime journeys. It will enable ships and seafarers to get in and out of ports quicker, reducing the overall duration of the journey. That means lower costs, less time for shipping, and easier manifest management.
How global crisis effect our shipping industry?
In a time of globalization, the countries are not only interconnected but also interdependent. This means that any event taking place in one part of the world will have a domino effect upon all other parts.
There are several examples of such global crises in the past. For instance, the tragic incident of the WTC attack on the U.S had affected every industry around the world. Or like the financial crisis of 2008 had a global effect.
This time again, the world suffers from another global crisis due to Corona Virus. All aspects of the shipping industry have also undergone the impacts of this crisis. There was a great fall in demand which’s why most of the shippers canceled their shipments. As a result, the production also stopped because of no demand. And it remained for quite a several months.
As a consequence, the trade suffered too much. 1t happened because of the limited activity. This, in turn, led to the shortage of labor as well.
In a globalized world if one country stops its export then it would affect other countries as well. This time China was the center of the virus and it shut down its export. Many countries relied on trade with China. In fact, China is the country with the most global export. The lockdown in China means there will be no supply to many other countries. That’s why the shipping industry experienced a huge setback this way.
Impact of Global Crisis on International Logistics:
The global crisis takes every industry in its impact. The same is the case with Logistics. Businesses all around the globe face troubles which generate the spiral effect. And logistics faced similar crises too!
For any business, logistics is very necessary. But during the global crisis, Logistics become so hard to manage. And that Is why many organizations or companies tend to avail themselves of services from the freight forwarders.
Which are third party logistics or (3PL) Furthermore, there is a decline in turnover and the companies observe numerous bankruptcies, therefore, the companies try to lower down the costs for survival.
Nevertheless, the logistics companies must come up with a plan or strategy to reduce the cost. The crisis is always predictable. But in times of danger, you can control anything if you plan well.
The coronavirus pandemic has pulled the shipping industry into an unprecedented global crisis. However, companies are looking toward smart solutions to counter shipping disruptions. Meanwhile, the shipping industry has seen overwhelming demand and have been scrambling to fulfill it.
Using data, shippers and traders can get ahead of the curve and focus their efforts on fulfilling the massive demand. Business owners need to adjust their practices, opt for unique shipping methods, and look out for changes in the shipping industry.