It is Friday and we thought we should close out a very busy week with some updates relative to previous supply chain management and industry developments highlighted in prior Supply Chain Matters postings.
Within our 2015 Predictions for Global and Industry Supply Chains, and within numerous subsequent transportation and logistics focused postings this year, we continue to highlight the industry turbulence impacting global transportation services. What caught our attention this week was a report from The Loadstar highlighting an Alphaliner report indicating that in the next few weeks, idled ocean container ships will reach the highest level since the past financial crisis, nearly one million TEU’s. That includes the idling of one Maersk Lines, 18,000 TEU capacity Triple-E vessel.
According to the Alphaliner report, idle containerships now amounts to 263 vessels representing an estimated 4.7 percent of global capacity. Most of this idle capacity is attributed to reduced demand on the Asia to Europe segment. As one might expect, the idling of a Triple-E vessel, a rather expensive asset is stark evidence of the building severity of the current excess shipping capacity has become. Meanwhile, the excess capacity crisis has spilled over to the ship charter segment with multiple sized ships being idled.
The Loadstar report further indicates that industry leader Maersk’s parent company issued a profit warning last week as a result of an unexpected $600 million shortfall, attributed to the “significant drop in rates.”
Industry transportation and supply chain teams can obviously spin this latest news in either good, or not as good contexts. As the industry sunsets from the peak holiday inventory surge period into winter slack, it is a complete buyer’s market in terms of container shipping rates, probably the best since the great global recession period in 2008-2009.
The not so good news, is that idle shipping capacity will continue to impact carrier bottom-lines, and that equates to added industry shakeout, and even more idle vessels. More importantly, it is a reflection that global trade volumes are declining beyond expectations.