2016 was another poor year for the container shipping industry and the picture does not look any brighter in 2017.
The problem is the industry has not learnt anything from its past mistakes and is grappling with the same issues it has been facing for the last 30-40 years.
In the absence of a mindset change on the part of the carriers in this industry, it is highly likely that the industry will continue to move in circles.
The main problem in 2016 was the issue of overcapacity, Tan Hua Hoo, executive consultant at Alphaliner, told a recent panel discussion at the Asian Logistics and Maritime Conference at the Hong Kong Convention Centre.
“Oversupply has been a persistent theme throughout the history of the industry,’’ he said. The second issue is the lack of profitability for the shipping lines, he added. “The shipping companies are continuing to struggle financially to stay afloat. This was highlighted by the large number of bankruptcies seen by the end of 2016.
“The third issue is of government who continue to provide financial support to shipping lines. Unfortunately, this has led to extending the downturn that the industry is facing. The weaker players should not be allowed to enter the industry.
“The fourth issue is the change in regulatory regimes. We have seen the EC come out with new significant regulations. This is a development that will continue to evolve.
“Lastly is the issue of regulation in the role of alliances.’’
Ironically, these are the same issues that were mentioned in a report entitled “a watershed year” issued by a publication in 1984 “The container lines are struggling with the same issues they faced in 1984,’’ said Tan. “So, we are in an industry that is moving in circles.”
Steve Saxon, partner at McKinsey & Co, told the panel discussion: “Comparing the return on capital versus the cost of capital, the container shipping industry seems to have destroyed an eye-watering US$86 billion in value over the past 25 years.” He added that the industry had incurred the same losses ($86 billion) in just the last six years, an indication that carriers were losing money at a faster rate each year.