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.
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.
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.