Maersk warns of container shipping overcapacity
Sometimes, expanding too quickly can be a bad thing. The global shipping industry learned that lesson the hard way.
A.P. Moller-Maersk, the world’s largest container shipping company, cut its full-year forecast amid fears of overcapacity, a problem that’s expected to plague the industry. Maersk’s overall profit fell 82 percent to 1.64 billion Danish kroner, down from 9.2 billion kroner last year.
The container unit of Maersk’s operations particularly suffered, as the company lost 1.58 billion kroner, which was in stark contrast to the 5.9 billion kroner profit from last year.
Shipping problems in Maerk’s operations emulate an industry-wide trend of falling rates and rising fuel costs, a dangerous combination. Rates for container shipping at Maersk fell 12 percent, while fuel costs rose 48 percent.
The increase in fuel costs was something shipping companies have been planning on tackling for quite some time. The overcapacity is what’s made the container shipping industry turn south. With a bustling global economy in the mid 2000s, shipping companies like Maersk invested heavily in building up a fleet that could handle what was expected to be a continued economic surge.
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The global financial crisis that started in 2008 scaled back shipping demand, however, and companies like Maersk have been forced to scale back shipping rates to deal with flooded competition because of the industry-wide overcapacity problem.
Despite those concerns, Maersk CEO Nils Smedegaard professed optimism talking with the Wall Street Journal.
“We are standing at a quite solid bottom at the moment,” Smedegaard said. “The high season just ended, so we don't expect volume growth in the next months. Realistically, we will continue to see low rates, but I find it difficult to believe that we won't experience some rates improvement during the course of 2012.”
Smedegaard said that Maersk plans on operating the sea at full capacity, which would indicate that a rate war could be in order.
“Some capacity will have to come out. We're not telling competitors what to do, but this is not an environment for small operators with weak balance sheets,” Smedegaard said.
DHL Claim Multi-Sector Collaboration Key to Fighting COVID
Since January, global logistics leader DHL has distributed more than 200 million doses of the COVID vaccine to 120+ countries around the globe. While the US and UK recently rolled out immunisation plans to most citizens, countries with less developed infrastructure still desperately need more doses. In the United Arab Emirates (UAE), which currently has one of the highest per-capita immunisation rates, the government set up storage facilities to cover domestic and international demand. But storage, as we’ve learned, is little help if you can’t transport the goods.
This is where logistics leaders such as DHL make their impact. The company built over 50 new partnerships, bilateral and multilateral, to collaborate with pharmaceutical and private sector firms. With more than 350 DHL centres pressed into service, the group operated 9,000+ flights to ship the vaccine where it needed to go.
With new pandemic knowledge, DHL just released its “Revisiting Pandemic Resilience” white paper, which examined the role of logistics and supply chain companies in handling COVID-19. As Thomas Ellman, Head of Clinical Trials Logistics at DHL, said: “The past one year has highlighted the importance of logistics and supply chain management to manage the pandemic, ensure business continuity and protect public health. It has also shown us that together we are stronger”.
Multisector partnerships, DHL said, enabled rapid, effective vaccine distribution. While international scientists developed a vaccine in record time—five times faster than any other vaccine in history—manufacturers ramped up production and logistics teams rolled out distribution three times faster than expected. When commercial routes faced backups, logistics operators worked with military officers to transport vaccines via helicopters and boats.
In the UAE, the public-private HOPE Consortium distributed billions of COVID-19 doses to its civilians as well as other countries in need by partnering with commercial organisations such as DHL. For the first time, apropo for an unprecedented pandemic, logistics companies made strong connections with public health and government.
“While the race against the virus continues, leveraging the power of such collaborations and data analytics will be key”, said Katja Busch, Chief Commercial Officer DHL and Head of DHL Customer Solutions & Innovation. “We need to remain prepared for high patient and vaccine volumes, maintain logistics infrastructure and capacity, while planning for seasonal fluctuations by providing a stable and well-equipped platform for the years to come”.
How Do We Sustain Immunisation?
By the end of 2021, experts estimate that we need approximately 10 billion doses of vaccines—many of which will be shipped to areas of the world, such as India, South Africa, and Brazil, that lack significant infrastructure. This is perhaps the greatest divide between countries that have rolled out successful immunisation programmes and those that have not. As Busch noted, “the UAE’s significant investments in creating robust air, sea, and land infrastructure facilitated logistics and vaccine distribution, helping us keep supply chains resilient”.
Neither is the novel coronavirus a one-time affair. If predictions hold, COVID will be similar to seasonal colds or the flu: here to stay. When fall comes around each year, governments will need to vaccinate the world as quickly as possible to ensure long-term immunisation against the virus. This time, logistics companies must be better prepared.
Yet global immunisation, year after year, is no small order. To keep reinfection rates low and slow the spread of COVID, governments will likely need 7-9 billion annual doses of the vaccine to meet that mark. And if DHL’s white paper is any judge of success, multi-sector supply chain partnerships will set the gold standard.