Strategies For Dealing With Container Shipping Overcapacity

The shipping industry has a problem. They built too many ships over the past decade, and now they need to think about, for the first time in recent history; how to deal with this overcapacity.

Below are three strategies could use to deal with the overcapacity.

1) Stop Building Ships.

This might sound crazy, but shipping companies faced with an overcapacity problem might want to consider only purchasing ships on an as needed basis. For example in the past year, the container shipping industry purchased 205 new ships, compared to only 70 in 2013. While old ships need to be retired to make up for new ones, there is no reason to do so, when so much overcapacity exists.

Just as there are shipping container leasing companies, there are also shipping rental companies that can help with supplying ships when there are sudden surges in demand. This solution should more than alleviate the need to continue investing in new and bigger ships.

2) Slow Down There Partner!

One of the best ways shipping companies combated high fuel price over the past few years was to use slow speeds of 14 to 18 knots compared to the normal 20 to 25 knots to deliver goods. The slowdown conserves oil. This is even more valuable now that oil is down 28 percent from its high point last year.

An unexpected bonus of slowing down is slower moving ships require more ships to deliver goods on time on a regular schedule.

3) Let’s Get Together.

Finally, shipping companies are meeting to discuss a solution together. The creation of the Transpacific Stabilization Agreement is a great example of this comradery among shipping companies. The group, which includes Cosco, Maersk Line, CGM CGM, Hapag-Lloyd, and the Mediterranean Shipping Company, have focused on everything from raising freight rates jointly to working on logistics.

When carriers get together to solve the overcapacity problem, good things can happen.

The overcapacity issue will continue to plague the industry, but with good planning and balance, the shipping industry can figuratively “right the ship.”

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