Here’s what global shippers can expect as they begin planning their ocean freight activities for the coming year.
With 2020 right around the corner, global shippers that are planning their ocean transportation for the coming year are probably wondering what new challenges, opportunities, and trends could impact their shipping activities.
Reflecting on 2019, Sheela Seth, DB Schenker’s Senior Vice President, Head of Ocean Freight USA, said the good news is that, unlike what we saw in 2018, there were no major ocean carrier events that negatively impacted shippers (i.e., carrier liquidations, massive cybersecurity breaches, etc.). The global market is stable, we didn’t experience the usual peak season this year, and carriers are focusing on strengthening their presence for 2020.
In July, Hyundai Merchant Marine (HMM) announced that it would join THE Alliance as a full member beginning in April 2020. A cooperating group of major container shipping lines, THE Alliance is expected to give the carrier access to “significant new business as it seeks to gain financial stability,” the WSJ reports.
The members of THE Alliance also established a new partnership with four members that will participate in the group until 2030. The actions were agreed on in Taipei in June, and are subject to regulatory approvals, the new contract between the four lines—Hapag-Lloyd, Ocean Network Express, Yang Ming, and Hyundai—will start this coming April.
According to Seth, HMM has ordered twelve 23,000 TEU vessels, which will be delivered in the second quarter of 2020. Additionally, eight 15,000 TEU new ships will join HMM´s fleet in the second quarter of 2021 and deployed for Far East – North Europe trade.
In May 2019, CMA CGM announced that its Singapore-headquartered subsidiary, APL, would exit the Asia-Europe trades after the summer. As a result, CMA CGM would be the sole carrier in the group to operate on the transatlantic, Asia-Europe, Asia-Mediterranean, Asia-Caribbean and Europe-India/Middle East markets. “The new organizational setup will allow the group to simplify its offer, making it more legible to its customers,” CMA CGM said in a press release, “and benefit from the expertise of specialist companies from coherent regional groups, while reducing its costs.”
Global Trade
The persistent trade/tariff situation did impact ocean shipping in 2019, with many shippers “rushing” to avoid the tariffs, which escalated and changed as the year progressed. These early moves resulted in an overall slowdown in ocean freight later in the year. Concurrently, exports to Europe leveled off, likely due to the ongoing challenge of Brexit plus a lack of incentives on the part of carriers and the exchange rate USD/EUR challenge.
Tariffs are also impacting ocean freight right now, with those impacts expected to continue in 2020. Although, the U.S. and China both said in November that they had made progress in talks, stirring hopes of a trade agreement later this month, the U.S. administration imposed tariff increases to 15% on $300 billion worth of Chinese imports in September and indicated plans to continue raising tariffs by up to 35% on $250 billion in other goods.
“These duties would extend to almost all Chinese goods that the US imports,” says Seth, “and are expected to weigh on global economic growth.”
Some companies are turning to countries like Vietnam and India to handle their manufacturing and altering their supply chain strategies. Seth says carriers and logistics providers are working to alleviate challenges associated with some of these new manufacturing locations and to create a more streamlined supply chain for shippers that explore these alternatives.
Combined, these factors will likely ward off any real “peak season” for ocean going into 2020, although Seth maintains a “cautiously optimistic” forecast for the year ahead.
IMO 2020 is Coming
Beginning January 1, 2020, the limit for sulfur in fuel oil used onboard ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass) versus a previous limit of 3.50% m/m, according to the new IMO 2020 regulation.
DB Schenker is watching this development closely and has a particular interest in how the ocean carriers choose to deal with it. To meet IMO requirements, for example, refineries are blending fuel oils that have both high and low sulfur contents to achieve a compliant fuel oil. Other options include the use of fuel additives, exhaust gas cleaning systems (“scrubbers”), or biofuels.
Use the Right Logistics Partner
With political uncertainty, the U.S. election in 2020, and undercurrents about a possible recession beginning to surface, DB Schenker is ready to provide the necessary global presence that shippers need to be able to navigate their supply chains.
As a logistics provider, DB Schenker partners with customers; it truly understands the ins and outs of the ocean market—be it full containerload (FCL), less-than-containerload (LCL), Ocean Solutions, Customs & Trade Advisory, Foreign Trade Zone (FTZ), or supply chain consulting. DB Schenker keeps its finger on the pulse of the ocean industry and has the expertise to anticipate challenges and offer immediate solutions.
“We’re very solution-oriented and we pride ourselves in helping customers save on freight costs, gain better supply chain visibility and lead time management” says Seth, “or any other number of challenges that they may be facing.”
With DB Schenker in their corner, shippers can rest easy, knowing that their ocean logistics are being expertly handled. We partner with carriers to manage service levels, specific product requirements and the familiar routes of getting individual shipments from Point A to Point B. With a worldwide presence and decades of expertise, DB Schenker provides a complete logistics package that helps shippers improve their supply chain efficiency and build their global businesses.
