- Limited supply growth (1.3%) combined with slightly better growth in container shipping demand (2.7%) to improve market fundamentals in 2016, according to a recent BIMCO report.
- Last year was the first year since at least 2004 container shipping supply grew by less than 5%, according to previous figures. The drop was likely due to widespread demolition of vessels, American Shipper suggests.
- Better market fundamentals lead to improve rates, which BIMCO notes could yield higher earnings for carriers. However, the ball is on the carrier's court as it's clear "decisive action" on the supply-side led to the better conditions.
While heated debate regarding rates lingers within the ocean cargo industry, a recent Drewry Shipping Consultants report argues that 2017 is off to a strong start for carrier freight rates and could lead the industry to rise above sea level once more.
The BIMCO data supports this claim, as it appears the shipping industry made a U-turn to correct its overcapacity problem en masse, whether through consolidation, re-networking, demolition, idling ships or even bankruptcy. The problem for shippers, however, is that rates are recovering from rock-bottom, and purposefully reducing supply (while needed for the industry's health) appears as an artificial way to raise rates.
Meanwhile, rates are going up and new alliances promise better service, but all signs have recently pointed to the contrary and shippers are suffering. Port congestion, miscommunication and capacity crunch on various lanes are delaying shipments. Stakeholders throughout the chain are suffering from industry-wide problems, sparking bountiful calls for greater transparency, at minimum.
Overall, this is good news for supply chains as ailing shipping lines promise more problems, not less. However, as rates rise and help the industry recover, carriers must remember to put their money where their mouth is and deliver better service as well.