Seabury: Airfreight likely to benefit from ocean shipping disruptions

Deteriorating ocean carrier profitability, port slowdowns, bankruptcies and a reshaping of the major alliances all contribute to the volatility of the container shipping market, according to Maritime Director Michel Looten of Seabury Group.    Recent disruptions to the ocean shipping industry are likely to benefit the air cargo industry, according to Michel Looten, the maritime director at industry consultant Seabury Group.    
   Despite volume growth and carriers attempts to adapt to an evolving market, the container carrier profitability has deteriorated at a rapid rate in the past few years, culminating in a 2016 that saw Hanjin Shipping liquidated, several other carriers purchased or merged, and deep losses for the major global players.    
   But when container shipping declines, airfreight benefits, Looten said at the annual CNS Conference in Orlando, Fla., last week.
   Marginal TEU growth rates the past two years have caused container freight rates to decline to below operating expenses on many of the major east-west trade lanes, prompting a further consolidation of ocean carriers from four large vessel sharing alliances to three.
   Looten noted ocean shipping is hugely dependent on Asia, as over half of all exports in container shipping originate in the region. Airfreight, on the other hand, sees less than half its market share originating from Asia, thus it is less dependent on a single trade.
   The industry is clearly making attempts to adapt to an extremely challenging market, but when major changes take place in ocean freight, airfreight is the primary beneficiary, according to Lootem
   “In 2015, the market share of airfreight in the transpacific trade rose to 2.5 percent thanks to a 37 percent increase in transpacific air trade,” said Looten.
   The main catalyst for this uptick? The slowdowns and backlogs of container cargo on the U.S. West Coast, which ravaged shipper supply chains across the country. But Looten noted that port crises are not one-off; they occur regularly, via strikes, backlogs and congestion and have major implications for airfreight traffic.
   The changes seen in 2016 – mergers, acquisitions, bankruptcy and new alliances – added to this volatility, providing further opportunities for air traffic trade to increase.
   “On the demand side, container shipping has matured, and global growth is not expected to hit the heights of the early 2000’s,” said Looten. “On the supply side, ship scrapping has increased but more needs to be done; there is still a lot of hidden overcapacity in the market by layed-up ships and due to slow-steaming.”