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Ocean Freight Market Trends That Can Transform the Industry

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The year 2020 has been a tumultuous one for the ocean freight industry due to the COVID-19 pandemic. The ocean freight market has been undergoing continuous change due to the pandemic and a host of other factors. 

Despite the disruptions, these trends are set to continue to shape the global maritime shipping industry in many ways.

This transformation can alter the value proposition, security, reliability, and many other industrial components, affecting everyone involved, including consumers.

The Affected Aspects of the Market

The industry’s key aspects that are affected by changing trends include supply quantity, supply frequency, fuel, associated costs, labor charges, availability, shipping routes, regular and hidden charges, vessel cost and construction time, etc.

The Trends Shaping the Things

 

  • COVID Pandemic and Economy 

 

The crashing of economies due to lockdowns around the world has brought the industry down to historic lows. The other critical news is that the effects are likely to have lasting impacts on the industry. 

Q2 2020 has turned out to be the worst quarter thus far for trade. Alphaliner’s July data reveals the extent of the hit taken, with order book-to-fleet ratio being reduced to 9.4%, i.e., 2.21 MTEU. Such low figures and the uncertainty surrounding it have led to the stalling of new projects as well. 

The current strong demand for cargo and good spot rates for East-West trades is driven by summer stockpiling. With a possible second wave in autumn, the prospect for the industry is uncertain. 

The different measures and policies adopted by different countries in-lieu of combating the virus mean variable economic prospects for the foreseeable future. This will determine the chances of ocean freight companies in various regions. 

Adding to that are delays due to safety measures that have to be taken to mitigate the infections’ risk onboard ships. Some have been docked to treat infected employees, increasing delays. New rules have been introduced as a result, and these are likely to stay for a while. These measures increase operational costs and the price of goods delivery as well. 

 

  • Innovative Technologies Making a Beeline 

 

Innovation is transforming the shipping industry at a rapid pace, leading the long-lasting effects on it. The development of latest-generation hybrid and electric propulsion technologies to go with alternate fuels will revolutionize the industry rather soon.

AI is set to bring in a slew of benefits to the ocean freight market due to ease of operation and reduced risk. Autonomous ships, predictive analysis, automated data acquisition and processing, and machine learning via neural networks will boost growth to all operators adopting it. 

Better construction techniques using robots and advanced nanotechnology construction materials will bring robustness to the ships. 5G and other connectivity options will keep ships online always. 

An abundant number of sensors will use that connectivity to relay the vital information they collect in real-time to anywhere on the planet.

 

  • Changing Methodology

 

SOP’s and other such methodologies are being changed as well. With greater data sets comes greater certainty and clarity that aid better decision making. SWOT analysis, procurement handling, and negotiations, contract and spot pricing, communication strategies, algorithms, forecasting, and modeling, etc. are all enhanced due to technology.

 

  • Impact of Geopolitics 

 

The recent trend in geopolitics has been to protect local markets. Globalization in terms of economics has taken a back foot, and trade deals have been negotiated in that context. This has reduced the density of trade and the movement of vessels that are responsible for it. 

For example, the Sino-US trade war has drastically reduced movement across the two countries, and resolution is nowhere near. While alternate routes between new partners have opened up, like soybean export from Brazil, they don’t come close to the sheer volume of trade between them.

 

  • Fuel Price Volatility

 

Fuel prices, which make up about 55% of the costs, are directly affected by the prevalent conditions. This significantly affects fuel tankers, which have been stranded with a full load and no takers. The variations in fuel prices and trade negotiations regarding it will determine the future course of the industry.

The move to reduce emissions from the industry worldwide has made it adopt new measures to reach the targets. The leading change comes from the development of alternative fuels like biodiesel, hydrogen, and clean electricity. They will cut costs on an unprecedented scale while reducing the impact of geopolitics on fuel.

The ocean freight market’s dynamic nature requires having up-to-date intelligence reports of the various components, enabling decision-making that benefits the industry.

 

Author’s bio: Ester Adams is a farmer of words in the field of creativity. She is an experienced independent content writer with a demonstrated history of working in the writing and editing industry.  She is a multi-niche content chef who loves cooking new things.

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