The COVID-19 pandemic has impacted virtually every industry, causing major production and maritime supply chain disruptions. Lockdown measures halted production at Chinese manufacturing facilities, caused staff shortages and forced international ports to close. Even the largest shipping companies were affected.
Despite congested ports, container shortages and manufacturing delays, consumer demand didn’t cease. Shipping companies were forced to adapt to the rapidly changing market and implemented strategies to continue operations. The lack of shipping containers in circulation caused a dramatic spike in container prices. Inflated rates meant that leading shipping companies turned record profits in 2020 and 2021.
The COVID-19 pandemic has further highlighted the power of international shipping companies. They essentially have a competitive monopoly over the distribution of goods worldwide. As global economies continue to recover, the container shipping industry remains volatile. However, there is still a huge demand for international container shipping.
The Role of Major Container Shipping Companies
The largest shipping companies in the world dominate the ocean shipping industry. Over the past two decades, strategic alliances have turned them into industry superpowers, with the top four companies holding close to 60% of the market share. The largest players are a combination of government-owned and private shipping companies.
They own the largest container ships and are active in almost every major port worldwide. These companies have also begun to diversify their service portfolio and are heavily involved in various related industries, including container manufacturing, fuel, and logistics services. They have a presence in all continents, from Latin America to Asia.
The top ocean carriers in the world today are:
- A.P. Moller-Maersk Group
- Mediterranean Shipping Company (MSC)
- China Ocean Shipping Company (COSCO Group)
- CMA CGM Group
- Ocean Network Express (ONE)
- Evergreen Marine Corporation
The marketplace volatility means there may be a fresh cycle of mergers and acquisitions of smaller container liners. How these companies rebound from the COVID-19 pandemic will primarily influence changes or trends in the ocean freight industry in the coming decades.
Adaptive Capacity of International Shipping Companies
The container shipping industry revolves heavily around asset management. Ocean carrier companies either own or lease the containers they use for cargo transportation. However, shortages and delays in operations during the pandemic made container fleet management extremely difficult. Even the biggest container ship companies that owned their container ship fleet struggled to establish fixed timetables and sudden container market changes.
The adaptive capacity of major carriers was the primary reason they could bounce back and meet consumer demands. They maximized container load capacity through consolidated shipments and strategic networking with other container liners. Many ocean freight companies met demand and overcame container supply shock and complex supply chains by sending blanked sailings.
This means canceling or skipping some routes to improve average efficiencies. Routes from Asia to Europe were reduced significantly. When COVID-19 cases caused production levels to drop in North America and Europe, Ocean carrier companies reduced capacity deployment by approximately 20%.
Several container lines on major trade routes also carried empty containers. Rather than waiting at American ports and container terminals to reload ships, container shipping lines opted to sail back to China without stock. While this increased their environmental impact in the short term, it allowed them to remain active and maintain cargo efficiency.
Blank sailings contributed to the spike in freight rates. Costs for all transport units were passed on to consumers, reaching record highs. 40-foot container, 20-foot container, and various sized reefer containers increased in price significantly. This allowed container shipping companies to earn massive profits throughout the turbulent period.
The Role of Commercial Ports
Commercial ports were also instrumental in helping container shipping companies rebound from the pandemic. They worked closely with shipping companies and alliances to strategically handle delays, congestion, and staff shortages. This helped reduce the short-term impacts of the crisis. Some of the main adjustments made by ports included:
- Longer shifts for port workers
- Social distancing protocols
- Equipment cleaning standards
- Skeleton team working each shift
- Increased use of operational equipment and vehicles (e.g., cranes, vans, and front loaders)
Port stakeholders also acted quickly to accelerate technology use, reducing the need for regular close contact between workers. Another key factor in the adaptation to the crisis was the implementation of compensatory financial measures. Ports facilitated early payment providers and delayed payments according to the needs of their clients.
Volatile Container Shipping Rates
Freight rates remain volatile, with container costs still four times higher than pre-pandemic. However, since January 2022, spot rates have started to decline. While there is still some congestion in ports around the world, it has eased in most major hubs. These factors suggest that freight rates may have peaked.
Stable demand and a reduction in blank sailings should also have a positive impact on freight rates for shippers. Carriers are in a stronger position to manage cargo-carrying capacity more efficiently. However, rising fuel costs and the delayed reopening of several key Chinese manufacturing plants still pose problems for international shipping.
What’s on the Horizon?
In general, shipping lines seem to have rebounded successfully from the most challenging aspects of the 2020 pandemic. However, recovery is ongoing, and various sectors within the industry continue to operate under severe pressure. With the container shortage set to last into 2022, international logistics may prove to be a strain on many businesses for another year.
In such unprecedented circumstances, it’s now more important than ever to work alongside a leading international shipping company. If you need advice, guidance, or services in overseas distribution, contact Asiana USA. We are dedicated to ensuring timely delivery of international freight.