Since Malcolm McClean developed the first standard shipping container in 1956, the container shipping industry has revolutionized how goods are transported worldwide. But what will the future hold for this rapidly growing industry?
New COVID variants and lockdowns at major Chinese ports in early 2022, supply chain disruptions due to the Russia-Ukraine War, and changes to IMO regulations have destabilized the industry. Major shipping companies are now re-evaluating how they transport goods internationally, shaping several industry trends in 2022.
The Increasing Importance of Sustainability
In recent years, there has been an increasing focus on sustainability in the shipping industry.
Shipping containers are often left unused for long periods, taking up valuable space in ports. In addition, shipping vessels produce a large amount of pollution, including greenhouse gases and oil spills.
The World Economic Forum reports that shipping vessels account for approximately 3% of CO₂ emissions annually; this makes the shipping industry the 6th largest global emitter. Across the entire industry, the three largest container shipping companies, Maersk, Mediterranean Shipping Company (MSC), and CMA CGM S.A., produce up to 80% of the industry’s emissions.
As a result, many companies are now working to find ways to make shipping more sustainable and reduce emissions, including things like:
- Using cleaner fuel sources such as biofuel and hydrogen cells
- Investing in green shipping materials
- Reducing the number of empty containers
- Constructing green marine transportation vessels and cargo ships
To encourage shipping companies to reach emissions and sustainability goals, the International Maritime Organization (IMO) has created a set of amendments to its regulations. They have partnered with major global projects, including GreenVoyage-2050 and the Global Industry Alliance to Support Low Carbon Shipping (GIA).
The Impact of Brexit on Container Shipping
Since the UK voted to leave the European Union, there have been many customs clearance changes to the shipping industry.
Before Brexit, shipping containers from the EU could enter the UK without customs clearance. However, post-Brexit, all shipping containers from the EU must go through customs clearance at a port in the UK.
This has caused delays and disruptions for many shipping companies. It has also resulted in higher costs for shipping companies, which now have to pay for customs clearance.
Despite the challenges, the shipping industry is adapting and finding ways to overcome the obstacles posed by Brexit.
Increasing Popularity of Intermodal Shipping
Intermodal shipping is a method of transport that uses multiple modes of transportation to move freight from point A to point B. The most common form of intermodal shipping is piggyback, which involves transporting trailers or containers on railroad flatcars.
While intermodal shipping has been around for decades, it has seen a spike in popularity in recent years due to several factors:
- The fuel cost has risen dramatically, making rail transport more cost-effective than road freight.
- Concerns about congestion and pollution have led to greater interest in green transportation options.
- Security concerns due to the Russia-Ukraine War and other instabilities make intermodal shipping an attractive option for companies that want to avoid the delays and disruptions associated with air travel.
Growth of Blockchain Technology in the Logistics Industry
The logistics industry has been under pressure recently to become more efficient and reduce costs. At the same time, there has been a growing need for greater transparency and traceability throughout the supply chain.
Blockchain technology has the potential to address these challenges by creating a shared, tamper-proof database of information that can be accessed by all parties involved in a transaction.
This would allow for real-time tracking of shipments and shipping lines, reducing the need for costly inventory management systems.
Blockchain-based smart contracts could be used to automate many of the tasks currently performed by human workers, such as verifying the authenticity of documents or arranging payment terms.
The Impact of Autonomous Ships
Self-driving ships are no longer the stuff of science fiction. Autonomous ships are becoming a reality with advances in artificial intelligence and sensors.
There are many potential benefits of self-driving ships, including improved safety, efficiency, and environmental protection.
However, there are some potential risks. Maritime jobs are already in decline due to automation, and self-driving ships could accelerate this trend. Cyberattacks are also risky, as autonomous ships rely on digital navigation systems. Another concern is the potential for collisions, as self-driving ships may not react as quickly as human-driven vessels.
The Rise of Mega-Ships
Megaships are large cargo vessels carrying up to 20,000 TEU (twenty-foot equivalent units). These ships have become increasingly popular due to their efficiency and economies of scale.
Megaships have reduced shipping costs by approximately a third over the last ten years, making them a desirable option for logistics companies.
However, mega-ships also have some drawbacks:
- Megaships require a unique infrastructure, such as deep-water ports and cranes that can handle their large size. Only several ports along the Western Seaboard can support megaships, including Los Angeles/Long Beach, SeaTac Alliance, Vancouver, and San Oakland.
- These ships can create congestion and delays at port facilities because they take a long time to load and unload.
- Megaships can be challenging to maneuver and are more likely to cause environmental problems.
High Carrier Costs Passed on to Customers
Carriers are experiencing ever-increasing costs due to inflation, rising bunker costs, scrubber installation, and using alternative fuels like LSFO. Customers should expect significantly higher freight rates over the coming year.
With an increased need for greener shipping operations, carriers must comply with numerous sustainability regulations to avoid punitive actions and financial penalties.
A common way carriers comply is by installing Exhaust Gas Cleaning Systems (scrubbers) to remove harmful pollutants from bunker fuel. This often requires retrofitting vessels, costing companies up to $5 million per vessel. Alternatively, companies can purchase an LSFO bunker providing pre-refined fuel at an additional cost.
Charter costs are also impacting shipping rates. Increased consumer demand means carriers rely on chartered vessels to supplement their fleet. However, scarce vessel supply means that charter rates have increased three-fold.
Optimize Your Shipping Operations with Asiana USA
Asiana USA will be well-positioned to capitalize on these trends and opportunities in emerging markets as the world economy continues to grow.
As Asiana USA expands its operations, the company will continue to provide superior service to its customers and remain current with container shipping trends to improve cost-effectiveness.
Asiana USA is committed to being a leader in the global market, and this commitment will continue to drive the company’s growth in the years to come.