Container shipping capacity set to outgrow demand
Many global economic experts view container shipping as an economic bellwether, pointing to international shipping traffic as a leading indicator when talking about future economic prospects.
If that’s true, we could be in for a double-dip recession after all. Global shipping leader A.P. Moller-Maersk saw its container shipping unit slide into the red this past quarter, lowering economic expectations around the globe.
Bunker fuel prices have skyrocketed, while freight rates have dipped approximately 30 percent to an unsustainable level, according to The Wall Street Journal.
Maersk controls about 16 percent of the world’s total shipping market and operates 500 ships around the globe. The company has ordered a full line of larger container vessels called Triple-E ships, the largest container vessels ever built, which will grow shipping capacity to a dangerously large level.
In 2011, capacity for Maersk will grow by an estimated 8.5 percent, with a similar growth pattern in 2012. Then, when the first wave of its Triple-E container ships arrive, Maersk will see its capacity increase by 10.2 percent.
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During a growing economy, this wouldn’t be much of a problem, as the shipping market would demand higher capacity to ship more goods. But with today’s market and the fear of a double-dip recession, higher capacity and lower trade could mean emptier ships and losses for global container shipping lines like Maersk.
Maersk competitor COSCO is seeing a similarly disturbing trend. While analysts are predicting a 6 to 7 percent trade growth forecast, COSCO has new vessels on order that amount to nearly 45 percent of its current fleet. The company has reportedly had freighters seized for non-payment.
This makes for an ocean freight market that is hit by an oversupply of vessels and an undersupply of trade materials. COSCO has reportedly had freighters seized for non-payment.
Cainiao Network Launches Customer-Centric Logistics
As the logistics division of the Alibaba Group, Cainiao Smart Logistics Network has decided to provide its Southeast Asian customers with unsurpassed service during its annual shopping festival. Based on customer feedback surveys, the company will expand its real-time customer service support and speed up delivery times. ‘By expanding and deepening our services, we aim to provide a stronger logistics infrastructure that can bolster the booming eCommerce sector, support merchants’ expansion into new markets and diversify retail options for consumers’, said Chris Fan, Head of Cross-Border, Singapore, Cainiao Network.
Who Is Cainiao?
According to TIME Magazine, Cainiao ‘is far from a typical logistics firm’. The company controls an open platform that allows it to collaborate with 3,000 logistics partners and 3 million couriers. This means that merchants can choose the least expensive and most efficient shipping options, based on Cainiao’s real-time logistics analytics. The company’s goal is to ship packages anywhere in the world in under 72 hours—and for less than US$3.00.
For countless small business owners around the world, from coffee-growers to textile-weavers, this could change everything. Usually, it costs about US$100 to ship a DHL envelope from Shanghai to London in five days. Cainiao aims to change that. Said its CEO Wan Lin: ‘The biggest barrier to globalisation is logistics’.
What’s Part of the Upgrade?
Throughout the Tmall festival, Cainiao’s logistics upgrade will be divided into four critical segments:
- Real-time customer service support. Cainiao has launched a direct WhatsApp channel for customers to receive logistics updates and ask questions.
- Expansion of air freight parcel size and weight limits. Packages can now be up to 30 kilograms or 1-metre x 1.6 meters to help ship large items such as furniture.
- Daily air and sea freight connections. Shipping frequency will almost double to seven times weekly to maintain resilience and efficiency.
- Compensation for lost or damaged packages. Customers will be reimbursed up to RMB 2,000 (US$311).
Where is the Company Headed?
From June 1st to June 20th, the finale of Tmall, Cainiao will ensure that its customers feel confident in the company’s ability to deliver their packages. Despite global shipping delays due to COVID, the show will go on. Said Fan: ‘This series of customer-centric logistics upgrades reaffirms our goal of pursuing value-added services to enhance customers’ shopping experience while mitigating challenges posed by external factors’.
Furthermore, Cainiao has recently expanded its Southeast Asian operations, achieving revenue growth of 68% year-over-year. In Malaysia, the logistics operation has partnered with BEST Inc. and Yunda; in Singapore, the company has partnered with Roadbull, Park & Parcel, and the Singapore Post. And if its recent measures help retain and grow its customer base, the company will be well-poised to lead the industry in resilient and customer-centric global logistics. ‘COVID-19 made everyone realise how important the logistics infrastructure backbone is’, said Wan. ‘And it gave us a peek at what Cainiao should look like in three years’.