As with many other industries that are having to respond to a changing world and technological evolution the container shipping industry has its own challenges that are going to help shape its future.
As tanker ships get bigger and more sophisticated and supply chains become more complex the industry is undoubtedly going to experience a significant amount of change.
Here are some key aspects that are likely to help define the future of this vibrant but complex industry.
1. Mergers and acquisitions will gather pace
It is widely predicted that the shipping industry will have to contend with a period of consolidation and the trend will likely see some major shipping companies joining forces or creating strategic alliances.
The top fifteen shipping companies enjoy about 70% market share and major global shipping alliances have even higher control of the market. If the mergers and acquisitions continue there could be some intervention from competition authorities and regulators, who will be understandably nervous about the prospect of that level of control.
2. The threat of protectionism looms
There are clear geopolitical tensions in the world right now and the fact that China and the United States are engaged in a trade war standoff at the present time is an indication of how the issue of protectionism could impact the container shipping industry.
If the conflict escalates this could force many shippers to reevaluate their supply chain arrangements.
3. An era of bigger ships
One thing is abundantly clear, the size of container ships continues to get larger every time a new vessel is unveiled and ready to be put into service. This has to be good news in some respects as it reflects a trend for increased demand and capacity.
The industry is responding to that demand by introducing larger vessels and adjusting capacity rates in the process for major shipping routes.
4. The influence of technology
Technology has managed to transform many industries and the container shipping industry is no different. Using technology to create shipping solutions is becoming mainstream and the pace of technology adoption is predicted to increase in pace moving forward.
Cargo and vessel tracking and the introduction of autonomous ships represent significant opportunities for the shipping industry. There are also challenges and risks that come with technological advancements such as the threat of cybersecurity issues, which have to be dealt with effectively.
5. There will be a supply and demand imbalances to deal with
There are definitely challenges ahead for the container shipping industry that will have to be addressed. One issue is that the trend for larger vessels will increase the supply and demand imbalance.
The reason for this is that there is intense competition for market share, as outlined with the trend for mergers and acquisitions, and the concern is that smaller operators might get squeezed out in this environment.
6. Rising fuel prices
Rising fuel costs are a threat to the shipping industry and it is estimated that fuel accounts for more than 40% of total costs.
This means that there is a sense of urgency to find ways to reduce fuel costs and the industry is finding innovative ways to achieve this aim.
Good inventory management and optimizing vessel speeds are just two of the ways that operators are approaching the task of managing fuel cost pressures.
7. Environmental concerns
There is little doubt that shipping companies will have to deal with new environmental regulations in the future.
Globalization has resulted in a noticeable increase in the level of shipping traffic crossing the seas and climate change concerns will also have a major part to play in shaping the regulatory landscape in the industry.
One simple solution that has been put forward is to reduce the speed of the vessels. The initiative, which is known as slow-steaming in the industry, can have a positive impact on carbon emissions and the results it can deliver are promising.
By halving the cruising speed of a large vessel by 50% it could cut greenhouse gas emissions and fuel consumption by about a third.
Regulations will have an impact too. The global sulphur reduction cap being introduced by the International Maritime Organization in 2020 will impose a global limit that is much lower than current levels.
Ships will have to be modified to cope with these changes and it will put upward pressure on fuel costs too.
Environmental concerns and responsibilities will be felt in the container shipping industry from a financial perspective.
8. Powered by wind
An innovative solution to this environment challenge could be the introduction of rotor sails.
These sails have the ability to harness the wind in order to propel the ship forward, which could be a viable way of combatting the prospect of rising fuel costs.
9. A sustainable shipping initiative
A fundamental problem relating to the cost of upgrades is that charterers’ contracts are not normally long enough to justify the investment required to finance upgrades.
In response, NGO’s sustainable shipping initiative has suggested that longer contracts and a fuel-share scheme could be away when it comes to finding a way to pay for the upgrades needed to meet future legislation.
10. Unmanned vessels
A controversial and ground-breaking suggestion being talked about in the shipping industry is the prospect of launching unmanned vessels at some point in the future.
Crew costs would obviously be eliminated and that could offset the increased costs of fuel but, as you would expect, there are many regulatory barriers to breakthrough before that idea gets anywhere near to being a reality.
The container shipping industry is facing great pressures in terms of delivering profitability whilst meeting environmental demands.
The best way that these demands are going to be met is to continue to explore innovative ideas and keep an open mind in respect of collaborating with others as a way of facing up to regulatory challenges from a position of strength.
There are many things that have the potential to change the future of the shipping industry and that’s why there is a lot of work going on behind the scenes to try and make the business model as future-proof as possible.