- Riviera conducted a webinar on Container Shipping Leaders to understand how digitalisation helps mitigate the challenges in container shipping.
- The experts discussed on the solutions to overcome the ongoing pandemic, right-sizing business operations and vessels, and maintaining resilience in a changing market.
- The webinar also focused on the supply chain problems with critical items such as sanitisers and protective masks.
- Rising costs, excessive demurrage, system outage issues and early booking, particularly in unprecedented times were the future challenges addressed.
A recent news report published in the Riviera, written by Jamey Bergman reveals why box shipping needs digitalising and downsizing to right size. The above mentioned topic is based on the webinar hosted by Riviera and the extensive details are as follows.
Riviera’s Container Shipping Leaders webinar
As Digital Container Shipping Association (DCSA) chief operating officer Henning Schleyerbach told attendees at Riviera’s Container Shipping Leaders webinar, “Covid-19 has been a stress test that has brought out the vulnerability of today’s optimised but inflexible supply chain”.
Key points highlighted by Henning Schleyerbach
- The container shipping sector did not hold up well under the initial stress brought about by widespread lockdowns and a global medical crisis.
- The pandemic has resulted in a less reliable supply chain.
- DCSA believes the supply chain needs additional standardisation and collaboration, largely through digitalisation.
- DCSA is working on standards to enable an ‘ecosystem’ of trust and maintained commitment to operational and commercial promises from all parties.
- Building trust through transparency would, in turn, build resilience in digital systems.
Pointing to supply chain problems with critical items such as sanitisers and protective masks, he said, “Some goods have piled up and this has resulted in a shortage of equipment and storage space at the terminals, mainly the transhipment terminals. The lower [overall] demand has also led to blank sailings. In addition to that, we have impeded workforces at the shippers but also at the shipping lines. And that made it a lot more difficult to get the goods… to your final destination.”
Smaller ships, bigger profit
Representing a “smaller ocean carrier”, Atlantic Container Line president and chief executive Andrew Abbott turned to the issue of vessel size and right-sizing business operations.
Takeaway points from Andrew Abbott
Every major container shipping alliance has had blank sailings while the same has not been true for smaller carriers.
Large carriers are also requesting government support to survive, a practice he said was not sustainable.
The number of TEU “floating around” was next to impossible to keep track of and monitor “unless you are fully invested in… operation with digitalisation“.
Larger ships offer greater economy of scale and lower pricing for customers, they only offer profitability if they sail full.
“Customers are numbers, you have too many” and “as a result your service deteriorates”.
With the conglomerates focusing on the highest volume and lowest profit-margin customers, he said, they lose the smaller customers who offer the most profitable cargo transport contracts.
“You take everything you can find, no matter what the price and you hope, at the end, your averages work out,” he said, calling economy of scale in this scenario an illusion.
Staying alive and well in challenging markets
From the perspective of a distributor working with the largest suppliers and users of chemicals and plastics, Vinmar director of transportation Alessandro Menezes said global shipping companies were simply looking at survival.
Essential elements conveyed by Alessandro Menezes
This year has been unimaginable in terms of the frequency and the depth to which these sailings were implemented.
“The coronavirus pandemic has created devastation in global shipping demand and the entire freight transportation industry has been forced into survival mode,” he said.
Rising costs was a big one, including that of excessive demurrage. In terms of risks, he mentioned system outage issues and said early booking was not a fix-all, particularly in unprecedented times.
Ultimately, Mr Menezes pointed to four pillars for shippers to be aware of when striving to remain resilient: collaboration, automation, optimisation and transformation.
“From a shipping perspective, I am proud we were able to continue to deliver our products but also to increase our global footprint in the very unprecedented environment in which we are living right now.”
Climate change, coronavirus and container shipping’s ongoing consolidation
DNV GL executive vice president for business development Jan-Olaf Probst looked at the impact of the ongoing Covid-19 pandemic on climate change-related regulation and how cargo ship owners are being affected.
Interesting facts from Jan-Olaf Probst
The wider maritime fuels landscape with regard to availability, production and relative energy density to examine the potential case for uptake of several different fuels.
While some alternatives can meet demand in the next decade, assuming a small increase, a rapid increase in demand would necessitate the same level of production capacity growth for all fuels except LNG.
“The only available fuel, of which there is plenty, is LNG. And that is often considered as a transition fuel. No one believes it [gets us to] the end line, but it gives us the possibility to make the step up to 2030 and then through to 2050, especially if you are considering conversions and [installation on] newbuilding vessels” he said.
Mr Probst’s recurrent message was that climate change will not wait for the world to recover from the coronavirus pandemic or any other concurrent crisis. It stands on its own as a crisis that must be addressed immediately and with careful planning for the longer term.
“In this moment, the world is fighting against Covid-19 considerations. The maritime industry has to cope and find its way out of those situations, as does the worldwide economy. But climate change is not standing on the side, and the kind of challenging role of environmental [regulation] for the maritime industry will not disappear due to Covid-19,” he said.
Concluding remarks
In his concluding remarks, Mr Probst reiterated that owners must prepare themselves to fight concurrent crises. Yes, several segments of shipping, including the cargo sector, are facing economic pressure even after a prolonged period of consolidation. Yes, the pandemic has created difficulty and perhaps even a paradigm shift for world trade. But neither of those realities give shipping or cargo vessel owners an out.
Right-sizing: downsizing or digitalising?
One question for the webinar panel focused on the trend towards mega vessels in container shipping, the impact on port logistics capabilities of those mega deliveries and whether the answer lay in smaller vessels, better digital logistics platforms… or both.
Here is what Digital Container Shipping Association (DCSA) chief operating officer Henning Schleyerbach had to say, edited for clarity.
With larger ship sizes, what used to be a small and constant flow of import or export boxes for a port is now coming in large bunches, increasing the congestion in a port and giving the ports more of a logistical challenge.
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Source: Riviera
