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Uncertainty in Container Shipping Profitability

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2018 has been a turbulent year for those in the logistics and supply chain management industry. Between constant market fluctuations stemming from newly imposed tariffs, rising operating costs, lowered reliability, and extreme capacity issues, many carriers have seen a generally discouraging first half of the year in terms of profits.

Third quarter pressures and focus on capacity

According to Drewry, after six straight years of losses, the container shipping industry ended 2017 with a total profit of $7 billion. With the 2018 peak season for shipping already over, the importance of third-quarter results is looming, and those in the industry are unsure of whether or not carriers will be recording a second consecutive year of profitability.

With recent carrier reliability being a concern in terms of third quarter performance, the JOC stated, “…if the schedule reliability of carriers in September is anything to go by, it shows that shipping lines are placing capacity management above all else following the loss-soaked first half.”

Poor Reliability

The industrywide trend of poor reliability continued into September and the JOC reported data from SeaIntelligence showing “Seven of nine months in 2018 recorded the lowest global schedule reliability of each month compared with the 2012-2017 range.”

Numbers indicate that the poor reliability is industrywide and not indicative of poor performance by a few carriers. According to SeaIntelligence and the JOC, “… the 15 global carriers recorded schedule reliability within the 51-73 percent range in September.”

Blank Sailings

One of the main reasons for the poor reliability in east-west shipping during the peak season was blank sailings. The JOC reported that, “…blank sailings reached their second-highest level in the third quarter compared with the past seven years.”

Even though blank sailings were not scheduled, and did not directly impact schedule reliability, having to alter plans due to the blank sailings did affect overall shipping schedules.

A SeaIntelligence analyst reported to the JOC that, “This means that shippers have been hit with the double-whammy of many blank sailings and poor reliability on the sailings that are not blanked. With continued weak demand and excess capacity, this is an issue likely to persist.”

At TOC, our team is dedicated to ensuring that all clients are informed of market changes and current conditions that may affect their supply chain. Be sure to stay connected to our Market Advisory page, which provides information on need-to-know industry updates.

Contact us today if you’d like to learn more about how we can create custom solutions to best fit your needs.

31 Oct, 18

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