After touching on the industry highlights of 2017, we wanted to turn our gaze forward and focus on the factors that will be affecting the shipping industry throughout 2018. While the events of last year will continue to change the way the industry functions, it’s important to continue moving forward. These are the trends we can expect in 2018 that will affect everyone in the shipping industry.
The economy is on the rise and while it’s expected to continue its growth, the ocean carriers schizophrenic attempts to both reduce capacity AND add meg-ships to the supply chain keeps us all in the dark on what to truly expect or forecast. The effects of capacity reduction by the airlines could be felt as heavily in Q2 as they were in Q4. The U.S. dollar is strong, and if it stays strong, imports will grow. The stronger the dollar, the stronger the import market, but exports will likely remain static until the US economic strategy to bring manufacturing back to US soil is played out. The shipping industry still tends to be cyclical and eCommerce, auto manufacturing, and consumer goods will drive what the cycle looks like.
Change in Lanes
Steamship lines are putting up trial balloons regarding their contracts with NVOCC’s; in the past, multiple NVOCC “clients” could be “named” accounts on an NVOCC contract. The complaint from vessel operators has been that NVOCC’s are putting different or more customer’s containers on those contracts in order to boost profit margins. Due to that belief, some vessel operators are attempting to apply a limit to how many “named” clients may be added to an NVOCC contract, to 2 or 3 clients only. Whether this negotiation strategy becomes universal for all contract negotiations with all vessel operators remains to be seen; but this strategy is designed to control pricing and increase vessel operator margins.
Continuing our updates on rising air freight rates, while we don’t expect to experience the exact conditions from Q4’17, there has been no significant increase in capacity, so pricing should hit a new normal that could be higher than has been experienced in the same year-over-year comparison.
Some trends may present uncertainty, but at TOC we are excited about the opportunities that technology advancements will present in 2018. At TOC specifically, we will have tech releases in 2018 that will provide a better and higher level of visibility and supply chain management from a big data perspective. While they have not been released yet, we expect a Q2 release and will announce the official date. These updates will improve the visibility and accuracy of our supply chain.
2018 is set to be an interesting year, as is every year in the logistics industry – at least we think so. As always, we are dedicated to staying on top of the trends, technologies and economic changes that impact our customers.