Select trends shaping global trade
Post-Panamax ships are the new norm within the shipping industry and are expected to handle 59 percent of the world fleet’s TEU volume by 2017. While these larger ships offer carriers greater fuel efficiency and economies of scale compared to smaller vessels, they do present challenges for shippers by limiting destination ports to those with the necessary infrastructure and labor to accommodate them.
West Coast seaports have benefited from these higher-capacity ships in recent years, and with the expansion of the Panama Canal scheduled for completion in 2016, East Coast ports are scrambling to address necessary capital improvements and be competitive when these ships come to call. Carriers, on the other hand, are left to address the challenges of an under-utilized world fleet and the increasing risk of overcapacity as new ships enter the water.
In an effort to stay afloat amidst economic headwinds facing the shipping industry, carriers have implemented cost-saving initiatives despite continued market turbulence. Larger carrier lines have separated themselves from the pack by entering into alliances that promise high levels of efficiency and utilization and greater market share.
Yet, the formation of these proposed alliances can be challenging. Most notably, the proposed P3 Alliance between Maersk, MSC and CMA was blocked by China on grounds that the alliance would have controlled a 47 percent market share of capacity on the Asia-Europe trade route.
Despite this, more alliances are likely to follow as carriers seek arrangements to address growing over-capacity in the world fleet; the 2M Alliance, for instance, formed from the ashes of the failed P3 negotiations.
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