Improving global demand has helped alleviate overcapacity issues in ocean freight shipping by increasing demand for transportation. Inventory restocking and economic growth in countries like China and the US have boosted shipping. Mergers and acquisitions of major shipping companies have consolidated capacity. Alliances between shipping companies are also adjusting to changes. However, intentional removal of ships and capacity is still needed to fully solve the overcapacity problem according to experts. Cooperation between shippers, forwarders and carriers will be important to efficiently manage capacity going forward.

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5. Improving global demand for goods
has resulted in a higher demand for
global transportation.

6. Inventory re-stocking, improved
US economic conditions and
Chinese demand for raw
materials as well as for such
commodities as food and
beverage have helped prop up a
sinking ocean freight market
plagued by overcapacity and
unsustainable rates.

7. When Maersk Line placed its order for the
first Triple E ships with capacities of
18,000 TEUs in 2011; everybody had to
make the same mistake and follow or
abandon the trade.
- Journal of Commerce

8. We conducted a Twitter survey last
year asking “How can the container
shipping industry eliminate
overcapacity?”

9. 36% of respondents indicated
mergers & acquisitions and another
36% indicated removal of capacity.
Meanwhile, 14% said alliance
changes and 14% believed the
market will simply solve the issue.

10. M&A

11. Mergers & acquisitions
have eased some ocean
freight overcapacity
concerns. Hapag-Lloyd
acquired CSAV in 2014,
CMA-CGM announced
its acquisition of NOL in
2015, Hapag-Lloyd and
UASC agreed to merge
and Maersk acquired
Hamburg Sud in 2016
are among some of the
acquisitions that have
occurred over recent
years.

12. Most recently is the
proposed merger of
Cosco and OOCL
which will create the
third largest global
container line as well
as the second largest
mover of US
containerized goods.
Not only have mergers
& acquisitions
contributed to shifts in
capacity but Hanjin’s
bankruptcy also.

13. Rumors of additional bankruptcies as well as acquisitions
continue to hover over the industry.
But as Jim Newsome, president and CEO of the State Ports
Authority notes, shipping line consolidation will ultimately benefit
the Port of Charleston.
In addition, Mr. Newsome further notes that industry
consolidation could let ports operate more efficiently and
profitably in the long run.

14. Meanwhile, alliances are changing to address the market
changes. New alliances came into effect this year and while
shippers and ports alike have had to adjust to the changes these
new alliances introduced,
In fact, we did see some capacity removal from the market earlier
this year as container lines prepared for their respective alliances.
But more is evidently needed.

15. Alliances

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17. M&A will not eliminate overcapacity
because ships can always be
deployed somewhere else.
Intentional capacity removal is the
only answer.
- Peter Tirschwell of the Journal of Commerce

18. Market Approach

19. Other means of managing overcapacity is the reintroduction of
cancellation fees as multiple shipping lines did just recently.
Carriers will often overbook particular ships to account for
anticipated ‘no-shows’. In addition, a shipper or forwarder, despite
being under contract with a carrier may resell capacity back to
the carrier or elsewhere at a higher rate than originally negotiated
per contract, thus holding the potential capacity hostage.

20. H2 2017 Expectations

21. With the expectation of a stronger peak
season ahead, space will be tighter than
usual and shippers will need to plan ahead
to protect their supply chain where
securing additional space during this
period may see higher premiums.
- The Journal of Commerce

22. Accurate forecasts from shippers will be vital to help manage
capacity on vessels and equipment needed to position and move
containers.
Otherwise, cancellation fees will be implemented and available
capacity will go unused. Cooperation between shipper, forwarder
and carrier is a must to ensure efficient management of
containers.