What a year it’s been! People have talked about the industry being ‘broken’ and needing a ‘quantum shift’ to move forward to support international trade effectively. Many people have spoken about logistics being a commodity, and a zero sum game for the good of trade. However, significant steps have taken place to move the industry forward. Here are 5 key changes that have taken place.
1. USD 300 Mio Cyber attack!
The Maersk line was hit by the NotPetya virus in late June, causing their systems to fail completely. They were unable to accept any bookings for two days, and the effects on their systems were felt for weeks. Their CEO, Soren Skou, estimated that the cyber-attack cost the company in the region of USD 300 million and forced the company to implement new and substantial protective measures. It is a great credit to the company that they were able to response quickly, and that such a catastrophic failure was so quickly address to have “only” cause this much damage and that they were running back to normal as quickly as they were. However, long-term confidence has been hit and this can only be repaired with time.
2. Maersk is no longer the largest
Partially, but not fully due to the virus attack, after two decades as the unchallenged largest shipping organization in the world, this year’s third quarter saw COSCO overtake Maersk as the largest carrier by TEU – this is despite the Maersk takeover of Hamburg Sud.
COSCO has risen to lofty heights, and is likely to remain there indefinitely.
That said, with the 2M alliance strongly in place, one would argue that the alliance of second-place carrier Maersk and third-placed carrier MSC still creates the strongest network and biggest overall market share.
3. Consolidation in Shipping
Following the Hanjin Bankruptcy, a flurry of merger activity occurred in the container shipping industry with the announcement of the merging of the three Japanese carriers—MOL, K line and NYK—planned for 2019, as well as the merger of UASC and Hapag Lloyd and the acquisition of Hamburg Sud by Maersk and OOIL by Cosco – just to mention just the largest ones!
In the 1990s, analysts had already predicted that there was room in the market for five global carriers and this is now coming to pass. The survival number appears to be between 1.5 and 2 million TEU, which is the number that carriers currently need to achieve to remain relevant and competitive in the global container market.
4. Online currencies and Freight Markets
While online freight markets are not exactly new, 2017 saw them become more mainstream and a flurry of emerging online freight markets. Companies, such as Flexport and New York Shipping Exchange, have existed for several years but they are now gaining traction and acceptance in the market. While newer companies, such as Shipnext and Xeneta, are offering freight rating and benchmarking services via different algorithms on different bases. It is likely that we will see some serious competition between these markets with some surviving and some not. I believe that the key will be the consolidation of these to gain benefits. This should also include the new cryptocurrencies, such as the TEU, which, while it is conceptually a positive move, they do not remain fully thought out and are not focused on customer needs, but rather on carrier desires.
5. Improving confidence
Finally, the final quarter of 2017 has seen market confidence increasing across the board with the key shipping markets all rising despite markets remaining constrained and volumes remaining low. There seems little reason for the confidence, yet it is there and holding: time will tell if this is a bubble, end-of-year spike, or sustainable but, for the first time in quite some time, there seems to be some light.
So, on that pleasant note, I wish you all the most prosperous 2018.
The Maersk line was hit by the NotPetya virus in late June, causing their systems to fail completely. They were unable to accept any bookings for two days, and the effects on their systems were felt for weeks. Their CEO, Soren Skou, estimated that the cyber-attack cost the company in the region of USD 300 million and forced the company to implement new and substantial protective measures. It is a great credit to the company that they were able to response quickly, and that such a catastrophic failure was so quickly address to have “only” cause this much damage and that they were running back to normal as quickly as they were. However, long-term confidence has been hit and this can only be repaired with time.
2. Maersk is no longer the largest
Partially, but not fully due to the virus attack, after two decades as the unchallenged largest shipping organization in the world, this year’s third quarter saw COSCO overtake Maersk as the largest carrier by TEU – this is despite the Maersk takeover of Hamburg Sud.
COSCO has risen to lofty heights, and is likely to remain there indefinitely.
That said, with the 2M alliance strongly in place, one would argue that the alliance of second-place carrier Maersk and third-placed carrier MSC still creates the strongest network and biggest overall market share.
3. Consolidation in Shipping
Following the Hanjin Bankruptcy, a flurry of merger activity occurred in the container shipping industry with the announcement of the merging of the three Japanese carriers—MOL, K line and NYK—planned for 2019, as well as the merger of UASC and Hapag Lloyd and the acquisition of Hamburg Sud by Maersk and OOIL by Cosco – just to mention just the largest ones!
In the 1990s, analysts had already predicted that there was room in the market for five global carriers and this is now coming to pass. The survival number appears to be between 1.5 and 2 million TEU, which is the number that carriers currently need to achieve to remain relevant and competitive in the global container market.
4. Online currencies and Freight Markets
While online freight markets are not exactly new, 2017 saw them become more mainstream and a flurry of emerging online freight markets. Companies, such as Flexport and New York Shipping Exchange, have existed for several years but they are now gaining traction and acceptance in the market. While newer companies, such as Shipnext and Xeneta, are offering freight rating and benchmarking services via different algorithms on different bases. It is likely that we will see some serious competition between these markets with some surviving and some not. I believe that the key will be the consolidation of these to gain benefits. This should also include the new cryptocurrencies, such as the TEU, which, while it is conceptually a positive move, they do not remain fully thought out and are not focused on customer needs, but rather on carrier desires.
5. Improving confidence
Finally, the final quarter of 2017 has seen market confidence increasing across the board with the key shipping markets all rising despite markets remaining constrained and volumes remaining low. There seems little reason for the confidence, yet it is there and holding: time will tell if this is a bubble, end-of-year spike, or sustainable but, for the first time in quite some time, there seems to be some light.
So, on that pleasant note, I wish you all the most prosperous 2018.
