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CMA Shipping 2023: Liner Shipping’s Commercial and Data-Driven Future

Barry Parker
Total Views: 2518
March 27, 2023

By Barry Parker (gCaptain) –

On Day 3 of the Connecticut Maritime Association’s well-attended Shipping 2023 conference, the Liner Shipping panel consisted of a group of experts on both the commercial and technical aspects of the business. During the discussion, questions came up regarding the future of alliances between carriers, which was not surprising given the recent breakup of the 2M Alliance (Maersk and MSC) and the unraveling of the TradeLens effort (Maersk and IBM) to build an industry-wide blockchain platform for liner shipping.

PJ McGrath, a panel member and Northeast sales representative for Hapag-Lloyd, had strong views on how the business might move forward. In one set of panel banter, he hypothesized on whether cargo owners might be willing to offer a premium for more reliable service, which statistically runs in the 70% – 80% range, in a manner analogous to how a handful of carriers are allowing the shippers to pay for guaranteed space on a vessel. When the subject turned to alliances and vessel sharing agreements, he said: “you are seeing some cracks in that model today… there have been some hints and rumblings that the U.S. might take a look at doing away with alliances.”

He did not want to predict the legalities in either the U.S. or the E.U., but said: “I do think that the way that the alliance structure looks will be different in five or ten years than it looks today… and that those changes will allow certain lines to put in more reliable services, at a premium.” He suggested that many cargo owners might continue with the conventional model, but some (presumably those moving higher value cargo), would pay for expedited services, albeit in smaller ships (and therefore, likely, outside the alliance umbrella).

Another aspect of potential changes would come in the ways that the alliances are set up, with McGrath, referencing earlier arrangements such as the New World Alliance and the Grand Alliance, where carriers operated their own services or used the best ship for the service.

In parsing the meaning, he explained that the line booking the cargo might not operate the vessel taking the cargo. This led, perhaps, to a more efficient and cheaper integrated service- but one where it was harder to distinguish one service from [another within the alliance]. Explaining further, and following up with a rhetorical question, McGrath said, “That’s where we will start to see a difference… and then the market will tell us… is it on-time is that service that the customers will really want, or whether it’s guaranteed space on origin?”

The theme of better information management permeated throughout the session. Panel member John McCown, a liner side veteran, offered predictions on the out-sized profitability of liner companies in 2022, and added: “In 2023, the industry will have a profit greater than one that it’s had prior to the pandemic… one of the things you will see is more aggressive management of capacity.”

Session attendees also gained some valuable insights into technical tools. Panel member Gurinder Singh, Director of Digital Insights for the recently formed ABS Wavesight, emphasized the importance of data transparency, telling the panel “we are really suboptimized as an industry… with each entity having its own data sources… from a system perspective, there is a significant amount of work to do.”

He highlighted digitalization efforts underway at the Port of Singapore, which he described as the showcasing the kind of investment that’s needed, to bring those systems online, that would bring transparency between owners, operators, ports and terminals, and service providers. Mr. Singh then tied his remarks to those of Hapag-Lloyd’s Mr. McGrath, saying: “The reliability improvements are very much dictated by commercial considerations but, at the end of the day, there is still efficiency to be gained, and that’s here. Hopefully, the industry is looking to move.”

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