Last year, I listened to a rather enlightening speech by a
professor at the University of Riverside in CA who explained the changes
at the Los Angeles and Long Beach Ports and how that affected jobs,
rail traffic, pollution, and how all this was effected by global trade
with China. It's a big complicated and comprehensive set of challenges
in logistics and economics. Not surprisingly, as free-markets economies
always are, and throw in the global trade issues, and it becomes very
obvious really quickly that everything affects everything else, and
linear decision making won't work.
Perhaps, this is why I am so intrigued by it all and why our think tank often addresses the flows of our civilization. Now then, at stake are vast fortunes, billion dollar companies, and the flow of all we know. Okay so, let's talk.
In fact, there was a rather telling story in the Journal of Commerce on March 5, 2012 titled; "Mega-Ship Trend Comes with Consequences," by Peter T. Leach, Senior Editor. The article noted amongst other things that; "Analyst predicts container industry will shrink to seven to 10 carriers by mid-2020s," which sounds about right to me, as I too have been discussing the global trade slow down, mega-ship capacity, and the reality that there will be winners and losers in this game.
These shipping companies must go for volume, invest in mega-cargo ships, consolidate, or face the Tsunami of bankruptcy and forced consolidation. The article also had an interesting quote from Lars Jensen; "The container industry will shrink to seven to 10 carriers by the mid-2020s, it may be eight, it may be 10, but there will be fewer players," who is also expecting more orders for 10,000 plus container ships, and a revitalization of big news consolidations soon, and really accelerating by 2015.
Now then, I'd like to address some more predictions that I'd like to add to this in light of my on-going scrutiny and ever present radar scanning of this industry. I believe all these issues and the others I've made will also cause the following concerns as the industry evolves and the competition adapts:
Smaller Shippers May Not Be Able to Compete on Global Trade Routes
The economies of scale will no longer be there for companies running smaller vessels across the Atlantic or Pacific or across the top of the world. The profit margins will not be there for the new price points. These smaller vessels will be forced into smaller routes, island hopping, or special orders, still, most are too big for that, and too small to compete with the global mega-ships. Also trade is opening up and larger shipments, ports, and shipping points are upgrading simultaneously, nearly everywhere around the world. This is a good thing for humanity but not so great for the smaller companies with the smaller ships.
Massive Industry Consolidation and Big News Bankruptcies
Some of the smaller routes will still be needed, but without the larger routes and big money maximum capacity routes available due to ship size and cost per container, these companies will not be able to stand alone. Some of these ships will be parked, mothballed, or cut up for scrap. The rest will end up being upgraded and used for spur routes for the bigger global shippers with big bucks and volume pricing.
Challenges for Ports and Shipping Schedules
Ports will have to upgrade or they will get bypassed by rail as the mega ships off-load at ports that can take the additional traffic and volume. Meanwhile, ports which are minimally upgraded will experience traffic jams, and angry communities and neighbors until maximum efficiency is reached to handle the new mega-ship volumes coming in at a much higher frequency. Some smaller ports will die or fall off the proverbial economic cliff and then decay while larger ports will expand and evolve - competing for this new volume paradigm.
There is an interesting paper on this worth reading, a thesis from Martijn Streng from Eramus University in Rotterdam titled; "The consequences of megaships," published in May - July 2011, which I believe sets the record straight and tells of the future evolution of the industry. Indeed, with the opening of the new larger Panama Canal locks it also has big implications for rail companies in the US, Canada, Mexico, and South America. The global shipping routes are changing, and as the Northern route opens up and the ice clears, these changes will favor the mega ships, and the companies which own them even more.
Indeed, I hope you will please consider all this and think on it when discussing anything to do with transportation, global trade, pollution, diplomacy, politics, jobs, ship-building, corporate mergers, and micro and macro economics.
Perhaps, this is why I am so intrigued by it all and why our think tank often addresses the flows of our civilization. Now then, at stake are vast fortunes, billion dollar companies, and the flow of all we know. Okay so, let's talk.
In fact, there was a rather telling story in the Journal of Commerce on March 5, 2012 titled; "Mega-Ship Trend Comes with Consequences," by Peter T. Leach, Senior Editor. The article noted amongst other things that; "Analyst predicts container industry will shrink to seven to 10 carriers by mid-2020s," which sounds about right to me, as I too have been discussing the global trade slow down, mega-ship capacity, and the reality that there will be winners and losers in this game.
These shipping companies must go for volume, invest in mega-cargo ships, consolidate, or face the Tsunami of bankruptcy and forced consolidation. The article also had an interesting quote from Lars Jensen; "The container industry will shrink to seven to 10 carriers by the mid-2020s, it may be eight, it may be 10, but there will be fewer players," who is also expecting more orders for 10,000 plus container ships, and a revitalization of big news consolidations soon, and really accelerating by 2015.
Now then, I'd like to address some more predictions that I'd like to add to this in light of my on-going scrutiny and ever present radar scanning of this industry. I believe all these issues and the others I've made will also cause the following concerns as the industry evolves and the competition adapts:
Smaller Shippers May Not Be Able to Compete on Global Trade Routes
The economies of scale will no longer be there for companies running smaller vessels across the Atlantic or Pacific or across the top of the world. The profit margins will not be there for the new price points. These smaller vessels will be forced into smaller routes, island hopping, or special orders, still, most are too big for that, and too small to compete with the global mega-ships. Also trade is opening up and larger shipments, ports, and shipping points are upgrading simultaneously, nearly everywhere around the world. This is a good thing for humanity but not so great for the smaller companies with the smaller ships.
Massive Industry Consolidation and Big News Bankruptcies
Some of the smaller routes will still be needed, but without the larger routes and big money maximum capacity routes available due to ship size and cost per container, these companies will not be able to stand alone. Some of these ships will be parked, mothballed, or cut up for scrap. The rest will end up being upgraded and used for spur routes for the bigger global shippers with big bucks and volume pricing.
Challenges for Ports and Shipping Schedules
Ports will have to upgrade or they will get bypassed by rail as the mega ships off-load at ports that can take the additional traffic and volume. Meanwhile, ports which are minimally upgraded will experience traffic jams, and angry communities and neighbors until maximum efficiency is reached to handle the new mega-ship volumes coming in at a much higher frequency. Some smaller ports will die or fall off the proverbial economic cliff and then decay while larger ports will expand and evolve - competing for this new volume paradigm.
There is an interesting paper on this worth reading, a thesis from Martijn Streng from Eramus University in Rotterdam titled; "The consequences of megaships," published in May - July 2011, which I believe sets the record straight and tells of the future evolution of the industry. Indeed, with the opening of the new larger Panama Canal locks it also has big implications for rail companies in the US, Canada, Mexico, and South America. The global shipping routes are changing, and as the Northern route opens up and the ice clears, these changes will favor the mega ships, and the companies which own them even more.
Indeed, I hope you will please consider all this and think on it when discussing anything to do with transportation, global trade, pollution, diplomacy, politics, jobs, ship-building, corporate mergers, and micro and macro economics.
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