Bigger is not always Better in Shipping

IMG_5794Bigger does not always mean something is better. And more of something does not always mean something is better either. The same can be true of the international shipping industry.

The Journal of Commerce and Hellenic Shipping News both recently reported about bigger and more vessels and the rise of shipping alliances. And both publications report that the combination of these things could be strangling worldwide trade.

Bigger ships are becoming a bigger problem. Currently, some shipping companies are spending hundreds of billions of dollars on new vessels that are bigger. More orders of new ships result in an imbalance of capacity.

The new shipping alliances are not helping either. Yes, more alliances might mean more sailings. But that also means more slow-steaming to save on fuel and more holding schedules. In some shipping lanes, the alliances make up an overwhelming majority of the available shipping options. This means that the smaller carriers could soon disappear.

The alliances and the larger vessels could be a troublesome combination for shippers. All of these problems result in volatile ocean freight shipping rates. And the added capacity on the ships means that the companies might need to turn to experienced freight forwarders to help them fill up their ships. But it is not just the carriers. Shippers are also turning to freight forwarders for their 3PL services to stay organized and receive the best shipping prices possible.

Hopefully, the carriers turn back from all of the alliances and slow down the new ship construction, because the combination of both could hurt shippers.

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