Overcapacity is taking its toll

Rob Shelly of Maritime Cargo Services looks at overcapacity and its impact on the global shipping industry.

It's easy to look at big numbers and trust all is well. But on the last day of August, shipping giant Hanjin, the worlds seventh largest shipping line was declared bankrupt, owing a staggering$8 billion.

As a result, 97 ships were stranded in different parts of the world carrying a total of $14 billion worth of goods. Samsung alone had $38 million of products in the 500,000 trapped containers on Hanjin ships. In all, 8,300 cargo owners were involved, and as Hanjin slipped into bankruptcy, its ships and cargo were frozen. Cargo shippers are having to pay $1,000's in fees to terminal owners and truckers to release goods and prevent perishable foods from spoiling.

So what caused the first shipping collapse in 30 years to happen? The race for biggest and best is not necessarily the route to success in this volatile marketplace. Overcapacity has become the watch word.

For example, China is home to seven of the worlds top 10 ports and today faces a huge challenge with overcapacity, estimated at more than 50 million TEUs. The shipping industry has issued disaster warnings since the financial markets crashed in 2008, when global trade growth slumped to 2%/year (compared with double digit figures in the previous three decades). Yet in response shipping giants, in their race to create larger and larger 'megaships', have been creating capacity growth of 6% a year. The global container fleet is now four times larger today than in 2000 (which equates to an estimated 30% surplus on the main shipping routes).

The combination of over capacity and stagnant cargo growth has provided cheap freight rates for exporters, and stripped shipping lines of profit. Freight rates now are half what they were two years ago on the main shipping routes.

It's temporarily good news, yet in times like this, work with an established freight forwarder to ensure your meat cargo is protected from the less obvious shipping risks.

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