As with every year, the holidays and end of the year activities, like the Chinese New Year, have meant low quarters for everyone in the shipping industry. But while Q1 is usually the lowest quarter of the year, 2017 was a productive albeit challenging year.
The industry highlights of 2017 have meant both growth and challenges. Changes in trade relations, freight rates, and alliances kept TOC on their toes throughout the year. At the end of a productive year, TOC achieved their growth objective, looking back on industry highlights can help pinpoint the challenges the industry can expect to face over the next year.
U.S. China Trade Relations
The new U.S. presidential administration and the forthcoming Brexit movement are likely to affect US-China trade relations and TOC’s Director of Global Development, Greg Scheevel, agrees that the relationship will be touchy and that things should be left alone while North Korea relations are being sorted out.
But in addition to the political climate, new trade routes in China may also change the nature of the U.S. and China’s relationship. The new trade strategy, “one belt, one road”, that includes a New Silk Road and scheduled rail service between China and Europe, is a brand new double trade initiative that is set to reopen channels between China and its neighbors in the west: most notably Central Asia, the Middle East and Europe. This means that Europe, who once depended on the U.S. for supporting their global supply chain because the route to/from China was cumbersome, will now have a new option. Scheevel of TOC says this could be troubling. “If volume continues to grow and prices continue to fall with continued use, that becomes more attractive to Europe, and China could get the agreements the U.S. would have enjoyed previously.”
Air Freight Prices
In this last year, air freight rates have risen to unprecedented amounts. As a November release stated, the air market continued to deteriorate for the forwarding and client community in terms of available space and pricing. Economy rates were eliminated and standard rates moved to former priority levels. From Europe, rates raised to between $7 – $10.00 per kg; from Asia, within 3-5 days, rates are running $15 – $20.00 per kg.
TOC experienced a shift in pricing when heavier cargo received a more expensive rate. This meant a new approach and TOC encouraged customers to be very clear when requesting quotes/service via AIR on a required delivery date and earliest ready for a pickup date.
In one example of new alliances, 3 Japanese carriers have fused into one. NYK Line, “K” Line, and MOL announced they are merging their container shipping businesses. New alliances like this mean there will likely be fewer competitive options. The use of vessel-sharing agreements is completely changing the way in which the industry is run, and Scheevel states that understanding these alliances and how they operate will be a challenge. According to a recent survey, up to 47% of shippers anticipate disruptions in vessel rotations, terminal locations and more.
Scheevel says the second half of 2017 was the most challenging of the last ten years for the industry. With three hurricanes back to back, the US Dollar strengthening, new dynamics to understand and rising freight prices, 2017 was a year of hurdles. But TOC’s growth shows their strength; with the company prepared to face whatever 2018 might hold.