- Growth in the number of new non-vessel-operating common carriers (NVOCC) has sunk from a high of 200 per year from 2002 to 2012 to approximately 110 per year from 2013 to 2016, the JOC.com reported Wednesday.
- The reduction in growth is likely attributed to the poor condition of the shipping industry in general, with vanishing and consolidating lines and an excess of vessels crowding the waters with little freight to sustain them.
- However, since the barrier to entry for new NVOCCs, some argue the business model is not in danger. After all, constantly changing rates, consolidations and new technologies leave space for a non-asset operator to help shippers better interface with now-larger shipping lines.
The non-asset industry is not isolated from the basic effects of supply and demand, and while it may be easy to think of these data points only in terms freight-ton miles carried or container slots booked, measuring the number of intermediaries may be more insightful to the state of the industry than the other measures.
That's because NVOCCs, as intermediaries, are directly impacted by shifts in both supply and demand in a way carriers and shippers are not. After all, the NVOCCs are the agents allocating the resources and having to track and shift prices to best adjust their services.
So what does it say for the industry that there is a slowdown in new NVOCCs entering the market? For one, it is no longer attractive to enter the market given a lack of new demand. Industry overcapacity and low charter rates have led many companies to stop chartering vessels or space for the vessels, forcing shipping lines to send the ships to the scrapyard instead.
In other words, as demand remains the same and outside factors keep rates at low level, supply is being forced to contract. NVOCCs, therefore, should be leaving the market not just entering at a slower pace — but it is always more complicated than basic economics. While supply may be shrinking, the production possibility frontier is also expanding due to increases in technology. Online booking, deals with Alibaba and Amazon and other such advancements in shipper-NVOCC/freight forwarder-carrier communication are allowing for better allocation of resources.
As intermediaries in the supply chain, NVOCCs and freight forwarders are especially vulnerable to general shifts in both supply and demand, but how the actors adapt point to larger trends in the industry.