How Has Container Shipping Survived The Economic Storm?

The strength of the international shipping industry is found in it’s ability to address new challenges and overcome seemingly insurmountable obstacles, whether they be financial, economic or demographic. This was most recently demonstrated in the actions of shipping industry leaders, when they were faced with the devastating global financial crisis that began in 2008 (and early 2009) and has continued to challenge the world.

Even though there was a sharp drop in international trade, that was compounded by the rising costs of fuel, the global shipping sector once again demonstrated it’s resilience and innovation by forging new container shipping alliances, investing in much larger container ships and funding improvements to infrastructure and ports around the world. For the most part, their focus has been on improving over-all efficiency within themselves and their industry partners.

container shipping focus

There was a time when Maersk’s container shipping line was losing $8 million to $9 million per day. Make no mistake though, they were not the only ones suffering from operational inefficiency, rising competition and falling freight rates. But, if they [the global shipping industry] hoped to be profitable once again, container shipping lines knew they would have to address these crippling issues and find viable solutions that would provide long-term benefits.

Alliances and Partnerships

Although subject to sharp scrutiny from officials and other shipping lines, container shipping alliances have emerged as an ideal option to combat vessel over-capacity and avoid unnecessary competition on busy international trade routes. Perhaps the most widely scrutinized has been the 2M alliance, consisting of Maersk Line and the Mediterranean Shipping Company (MSC), two of the world’s largest container shipping lines.

To decrease the commitment and costs associated with maintaining a large container fleet, many shipping lines have chosen to partner with a container leasing company. Under lease agreements, container shipping lines do not have to invest human resources into managing and maintaining an active fleet of shipping containers.

Port & Terminal Investments

The additional time spent at port is negatively reflected in the shipping line’s profits. A longer stay at port mean more money. This has encouraged industry leaders and government officials to invest in improvements like innovative terminal software, railways/roadways, and ship-to-shore cranes, that will increase operational efficiency and decrease the length of port calls.

Ultra-Large Container Ships

Container shipping industry leaders have made enormous investments in ultra-large container vessels, like Maersk’s Triple-E fleet, that have been specially designed to lower the company’s bunker use and reduce the vessel’s environmental impact. In fact, the name Triple E is derived from the vessel’s three design principles: Economy of scale, Energy efficient and Environmentally improved. These ships are not only regarded as the world’s longest ships in service, but also the most efficient container ships per twenty-foot equivalent unit (TEU) of cargo.

the triple e container ship

In making multi-billion investments in the three areas identified above, major container carrier lines have been able to significantly lower their operational costs and improve their profit margin, year after year. In addition, this approach has provided an opportunity for them to address environment responsibilities and commitments, in a manner that is profitable for them as well as the economy and environment.

Can Investments in Global Trade Reduce Investing Risks? Yes.

Before making an investment in global trade, it is important that you understand what it is. Quite simply, global trade is the total amount of consumer goods being sold across the planet. So, how does an investor invest in this ever-expanding business? Well, the great news is that it is no longer an investment secret and it is actually very simple.

As international trading increases year after year (estimated to be 4.7 percent growth in 2014), the exchange of goods and services continues to flow through established entities like ports, shipping vessels, trains, trucks and various other cargo supplies. In order to participate in this international exchange, you must either own a shipping line, purchase shares in the railway industry, or find a way to purchase small assets that are used throughout the entire trade process; like shipping containers for example.

Many investors are unaware of the fact that they can buy and lease shipping containers for international businesses to employ (and pay for the service), allowing them to earn a steady profit while other people exchange goods. This is how investors can participate and contribute to global trade itself and earn steady returns while the world economy prospers.

According to the U.S. Chamber Of Commerce, over 97 percent of the 302,000 companies that export goods from the United States are small to medium sized businesses. This means that firms that do not have the necessary financial infrastructure to handle their own shipments of cargo, will increasingly seeking help from shipping lines. Although the exact global figures are not known, the fact that 97 percent of American export market utilizes some aspect of infrastructure and/or maritime assets to get their products from one area of the country to outside markets, should be a great indication that the demand for container shipping will remain well into the future. This long-term dependence upon the shipping industry and cargo containers, eliminates many of the risks and uncertainties that are associated with investing today.

The total value of goods exported from the United States totaled more than $2.3 trillion. When you consider that over 80 percent of the world’s purchasing power, 92 percent of economic growth and 95 percent of the world consumers live outside the United states, it is very appealing to consider investing in containers and the global trade of consumer goods.