Our Container Shipping Leaders webinar saw experts delve into the impacts of the ongoing pandemic, right-sizing business operations and resilience in a changing market
As Digital Container Shipping Association (DCSA) chief operating officer Henning Schleyerbach explained, "Covid-19 has been a stress test that has brought out the vulnerability of today’s optimised but inflexible supply chain".
Mr Schleyerbach said his experience as a physicist had taught him that putting a system under stress reveals learnings about the reliability of the system.
Pointing to supply chain problems during the pandemic with critical items such as sanitisers and protective masks, he said, "Some goods have piled up and this has resulted in a shortage of equipment and storage space at the terminals, mainly the transhipment terminals. The lower (overall) demand has also led to blank sailings. In addition to that, we have impeded workforces at the shippers but also at the shipping lines. And that made it a lot more difficult to get the goods… to your final destination."
In the end, Mr Schleyerbach said, the pandemic has resulted in a less reliable supply chain and said the DCSA believes the supply chain needs additional standardisation and collaboration, largely through digitalisation.
Representing a "smaller ocean carrier", Atlantic Container Line president and chief executive Andrew Abbott turned to the issue of vessel size and right-sizing business operations.
"From a carrier perspective, you’ve got a lot less cargo than you did," he said. "When you have a market decline, there is not enough cargo around to fill everybody’s ships and certainly not enough cargo around to fill a big ship."
Noting that "there is always enough cargo around to fill a little guy", Mr Abbott said virtually every major (container shipping) alliance is blank sailing but not so for smaller carriers. He said those large carriers are also requesting government support to survive, saying that reality was not sustainable and drawing comparison to airlines with large aircraft going out of service.
"The ocean carriers seem to think that we can buck the trend when the basic premise is the same," he said.
Looking at the largest carriers, he said the number of TEUs "floating around" was next to impossible to keep track of and monitor "unless you’re fully invested in... operation with digitalisation".
While larger ships offer greater economy of scale and lower pricing for customers, they only offer profitability if they sail full, he said.
When "customers are numbers" Mr Abbott said, "you’ve got too many" and "as a result your service deteriorates".
Mr Abbott laid out a scenario where large container lines with large vessels outsource customer management to wholesalers and freight forwarders to take over customer care. With the conglomerates focusing on the highest volume (and lowest profit) customers, he said, they lose the smaller customers who offer the most profitable cargo.
"You take everything you can find, no matter what the price, no matter what the cost and you hope, at the end, your averages work out," he said, calling economy of scale in this scenario an illusion.
DNV GL executive vice president for business development Jan-Olaf Probst took on the impact of the pandemic on climate change related regulation and how cargo shipowners are affected.
"Yes, the present situation of Covid-19 is hitting the maritime industry, but climate change is not going away," he said.
Noting that IMO was continuing to make progress on developing the regulations in spite of the pandemic, Mr Probst discussed the fuels landscape with regard to availability, production and relative energy content to examine existing and potential uptake.
While some alternatives can meet demand in the next decade, assuming a small increase, rapid increase in demand would necessitate the same level of production capacity growth for all fuels except LNG.
From the perspective of a distributor working with the largest suppliers and users of chemicals and plastics, Vinmar director of transportation Alessandro Menezes said global shipping companies were simply looking at survival.
"The coronavirus pandemic has created devastation in global shipping demand and the entire freight transportation industry has been forced into survival mode," he said.
Noting it is not unusual for global carriers to avoid blank sailings by cancelling voyages to prevent further financial loss, Mr Menezes said this year has been unimaginable in terms of the frequency and the depth to which these sailings were implemented.
"From a shipping perspective, I am proud we were able to continue to deliver our products but also to increase our global footprint in the very unprecedented environment in which we are living right now."
Addressing the question of future challenges to sustainability and viability for shipping, he said rising cost was a big one, including that of excessive demurrage. In terms of risks, he mentioned system outage issues and said early booking was not a fix-all, particularly in unprecedented times.
Ultimately, Mr Menezes pointed to four pillars for shippers to be aware of when striving to remain resilient: collaboration, automation, optimisation and transformation.
Attendees expressed their own opinions on the impacts of the coronavirus pandemic by way of polls. Split nearly in half, attendees said this has had a moderate or severe impact on shipments (48%) with only 5% saying they had seen no impact. In a 60-40 split, attendees said they preferred to do business directly with shipping lines over freight forwarders, respectively.
You can view the webinar, in full, in our webinar library.
And you can sign up to attend our upcoming webinars on our events page.