07-02-2017

Container Shipping: What next for the smaller TEU fleet?

containership

Smaller TEU vessels in particular have to take advantage of the commodities that require a reactive export or import program where the larger TEU vessels can’t monopolize the trade routes.

The lack of port infrastructure, shallower waterways or cheaper inland transport costs provide the opportunity to become the versatile workhorse businesses want to offer to their clients for a customer-focused approach. This could also ease the pressure not only on the banks but also the oversupply of shipping capacity and have a positive effect on freight rates.

The time is indeed good for a major shift towards customer focus as there is yet more pressure to mount upon the smaller container ships segment. As the new alliances strive to cut costs through economies of scale and reducing their counterparty risk they may not renew their chartered in vessel contracts for some of the smaller TEU vessels. With the potential of extra ships in a free roam mode, finding new solutions for employment would get even more challenging.

Keith Gaskin, Group Commercial Director, SEKO Logistics believes “The lines have to be nimble and recognise opportunities that aren’t always met by the largest carriers and the largest vessels. By deploying vessels into the smaller ports, it satisfies the need for cargo delivery points that aren’t near the main ports for inbound and outbound volumes. By servicing the smaller ports nearer where the client’s facilities are based, it is a more eco-friendly option by reducing the road haulage journey and also stripping out cost. In a time where consolidation between carriers is becoming ever greater, I feel the shipping lines that are nimble and can react quicker to customer requirements are in a better position to increase their customer base and their margins. It’s not always a case of bigger being better. Reviewing customers’ needs and being nimble enough to react to them can show the way to sustainable profitability.”

Such a customer focused approach offers clients reduced sailing times compared to the traditional liner services. The knock-on benefits could streamline the company’s overall supply chain costs through reductions in terminal, port, customs and inland trucking costs. This could afford both parties a competitive advantage that brings more certainty from a pricing standpoint as well as maintaining the required agility.

The shipping industry remains within the clutches of rough seas but the container market is showing signs of positivity to steer vessels away from the eye of the storm by scrapping ships under 10 years old and through mergers and acquisitions. This looks set to continue with more vigor in 2017 as countries and the major liners cease to flog the dead horse and form logical alliances to compete in the world arena.

Shipowners are always analyzing whether the best employment should be the spot or term market. Putting your faith in the right horse is more an art than a science but everyone has an opinion. This makes the industry exciting and players want to remain a part through thick and thin.

Source: Platts 

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