“Logistics during a global pandemic - what we’ve learned, what needs to be changed” was the motto of a video call organized by shipping line Hapag-Lloyd AG last Friday (18DEC20). Speakers were Rolf Habben Jansen, CEO Hapag-Lloyd AG, Lars Jensen, Founder and CEO of SeaIntelligence Consulting, and Tim Scharwath, CEO DHL Global Forwarding, Freight (DGFF). A core and unanimous take of the trio was that capacity will remain scarce in H1 2021, possibly even longer, with demand outgrowing maritime transport offers, and rates staying at high levels. Yet, with the emissions trading system mandated by the EU just around the corner, coupled with low sulfur rules and a tentative rise of bunker prices, the shipping industry’s gold rush might be dampened.
However, how long this money-making gap between supply and demand benefitting the shipping industry might last, none of the experts wanted to predict exactly. “We cannot look into the crystal
ball, but all available data indicate that the current situation will last for a quite a while,” Lars Jensen stated rather generally. This estimate was supported by Hapag-Lloyd’s Habben
Jansen, who pointed at out that order books for new container vessels are nearly empty, with only “8% of the global commercial fleet of megamaxes standing in the books of shipbuilders.”
This preserves the current capacity squeeze and tends to keep spot rates high, thus filling the coffers of shipping lines, cargo airlines, and operators of freight trains crossing the Eurasian
land bridge, the executive predicted.
As for his own company’s fleet policy, the manager had recently indicated to media that it was considering placing a new order for mega containerships, yet without revealing specs. The issue will be decided in the first half of 2021, he said.
So, which big points apart from fully booked shipping capacity in months to come does the maritime industry take into 2021?
Products are getting smaller
One lasting trend was mentioned by consultant Jensen, who emphasized a new dispersal of the supply chain, with shipments having become much smaller due to the miniaturization of components and entire products. This goes hand in hand with the diversification of production sites because multinationals “have stopped putting all their eggs into one basket, a lesson learned from the tariff dispute between China and the U.S.,” he stated.
Another issue that will continue causing the shipping industry headaches, is the dramatic scarcity of containers evidenced throughout the pandemic. The solution is opting for a somewhat costlier but more balanced inventory policy, easing the squeeze to a certain degree, and enabling operators to be prepared for sudden spikes in future, Mr. Habben Jansen advocated.
Steel boxes remain being a scarce commodity
This appeal reflects the fierce battle of shipping lines fought in 2020 to secure sufficient steel boxes for fulfilling orders. In the case of Hapag-Lloyd, 300,000 additional containers had to be organized short term to cope with high consumer demand, which turned out to be a herculean task. Forced to stay home in times of lockdowns, consumers shifted their spending behavior from leisure travel and flying, to purchasing household goods, clothing, and personal items. This considerably increased both ocean and air transport volumes.
And the outlook for inventories? The 3 experts do not expect any easing of the container scarcity issue in the foreseeable future. Particularly the last few weeks have shown where the problem lies: “Shippers and forwarders simply need too long to return the boxes to the quayside, this way slowing down the entire supply chain and reducing the boxes’ availability,” Mr. Habben Jansen criticized.
Ongoing problems: congested ports, poor hinterland connectivity
Another hurdle that will not be set aside in the near future is the lack of available port infrastructure, leading to congestions -> frustrated consignees -> delayed delivery of ordered goods, and high capital tie-up. This is best shown in the case of Los Angeles where many vessels are forced to anchor offshore and wait for a free berth. However, such bottlenecks can only be eliminated in the long term. This is coupled with insufficient rail and road infrastructure in many hinterlands, particularly in Europe, the experts complained.
Two big points
On the more positive side was digitalization which was driven forward in an unprecedented way during the pandemic, enabling staff working from home very efficiently. “One of my major 2020 takes, is that running a large company remotely is possible without causing negative effects. On the contrary!” exclaimed Tim Scharwath of DGFF.
A final encouraging take was mentioned by Copenhagen-based Lars Jensen. He pointed out that during 2020, the industry proved to be much more resilient and mature compared to other crises, weathering the Covid-19 storm fairly well.
The video call ended with that inspiring statement.
H-L made itself an early Christmas present by inking an order for 6 ultra large container vessels, as announced today. Each of the giant container ships is capable of accomodating 23,500+ TEU.
is South Korean ship yard Daewoo Shipbuilding & Marine Engineering that will deliver the mega ships between April and December 2023. Through the additional capacity offered on routes
between Europe and the Far East, HL increases its competitiveness significantly including that of its AL4 parter carriers in The Alliance, says the shipping company.
The financing of the 1+ billion USD investment has already been secured, states H-L's maangement.
All 6 vessels will be fitted with a state-of-the-art High Pressure dual fuel engine, which will be extremely fuel efficient, emphasizes H-L. The engines will operate on LNG, but have alternatively sufficient tank capacity to operate on conventional fuel as well. The decision in favor of LNG is part of H-L's sustainability program.
Rolf Habben Jansen, CEO of Hapag-Lloyd stated:
“With the investment in six ultra large container vessels we will not only be able to reduce slot costs and improve our competitiveness on the Europe – Far East trade, but also take a significant step forward in modernizing our fleet. Additionally, we will further reduce our environmental impact.”
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