12 shipping companies have announced huge losses in the past quarter. Drewry consultants estimate that the losses in shipping can amount to $10 Billion this year alone. The well-known reasons are a decline in global trade and too many ships built chasing too little cargo. A not so well known point is the growing size of global container fleet with individual ships capable of carrying 20,000 TEU containers. This has resulted in the cost of carriage crashing to less than 50%. As usual, shipping lines get together and form alliances. Currently, three quarters of the global market are covered by about 11 alliances. Alliances are not solving the problem. Freight rates keep falling.
What to do now?
Many major shipping companies are beginning to focus on making existing ships smarter. In this age of digitization, they would like to monitor every aspect of the ship’s operation and this kind of operation can result in dramatic savings in cost. In other words, all ships are collecting more and more data. Just by putting sensors on empty containers, Japan’s NYK saved $100 million. It is estimated that the shipping lines can save up to $20 billion a year with these new developments which involves fitting sensors and collecting and analyzing data. These data analytics reveal optimum speed, ideal voyage, predictive maintenance, optimum trim etc. Crunching all this data is going to lead to substantial savings.
Another silver lining is that the consumption of oil is increasing. This indicates greater industrial activity, power generation and GDP growth. For the far sighted Nostradamus’s of the shipping industry, the recovering in shipping is around the corner. The only question is does it take 2 years or 3 years to round the corner.
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