Green Hydrogen Hype Fades as High Costs Force Projects to Retreat
(Bloomberg) — Climate-friendly hydrogen was one of the most-hyped sectors in green energy. Now the reality of its high cost is taking its toll. In recent months, some of the...
By Alex Lennane (The Loadstar) – Container shipping lines yesterday shrugged off accusations that bigger ships and alliances would lead to less choice and less supply chain resilience, and argued that instead, shippers had brought these changes upon themselves.
Olaf Merk, of the International Transport Forum, explained to delegates at Transport Logistic in Munich how the recent changes in the liner industry could lead to a negative outcome for the supply chain.
“There is a pathway where bigger ships and vertical integration give rise to the concentration of ports and cargo, and they will have less leverage as the shipping lines get more powerful.”
Mr Merk pointed to how consolidation had changed the market: in 2000, four carriers had 23% market share; while in 2016, four carriers held nearly 50%. In addition, fewer ports were served.
“Alliances have become an important mechanism in container shipping. Of the major trade routes, 95% are covered by three alliances. Bigger ships have led to consolidation, alliances and oligopoly.
“All of this could lead to less return on investment for transport infrastructure, less choice and less supply chain resilience,” he said.
See Also: New Shipping Alliances Bringing Chaos to Asia-Europe Tradelanes
Chris Welsh, secretary general of the Global Shippers Forum, said the new structures meant less frequency and less choice for shippers.
“Is this the right way to go? Is it right to have homogeneity, over diversity and choice? Other industries have not chosen that path. I think the industry has a long way to go to convince customers that this is right.”
However, the shipping lines were unapologetic, accusing shippers of paying too little.
“Big ships were the way to go in our industry,” said Maurizio Aponte, executive director of MSC. “We had no other option.
“It was because of low margins. We, at MSC, have grown organically. [Alliances] are not in our DNA, but the reality is we had to do something. Margins have been very, very slim, if there have been any at all.
“As long as customers don’t start to think differently, we are not in a position [to do things differently]. We want to point out that fewer sailings to fewer ports is because we had no other way to go. Chris Welsh should ask his members about that. We have been commoditised, and not by choice.”
Thorsten Haeser, CCO of Hapag-Lloyd, agreed. “It is about cost pressure and very, very low margins. We have had to consolidate, and that’s a healthy thing as the industry was not in a good shape and had to deal with the volatility.”
But Mr Welsh countered by asking the lines to think differently.
“The industry is in danger of talking itself into ‘Group Think’ – that there is only one way,” he said.
“I think there are opportunities for different business models to emerge. What is in place now does not offer the best to customers. That’s not about price. It’s overall management of the supply chain. Others are taking the value out. A new business model is viable and I wouldn’t be surprised if a disruptor came into the market – it’s ripe.”
However, the shipping lines questioned who would have deep enough pockets to enter such an asset-heavy industry.
Mr Aponte said: “We are talking about supply chain management. There is so much inefficiency on the cargo side. I don’t want to blame the customer, but there is a lot that can be done to improve models. We are doing everything we can to protect the integrity of shipping.”
Mr Haeser added: “It’s on us as carriers to work out models. A disruptor would either need very deep pockets or would have to play with us, so it’s up to us to drive this. We have the skills.”
He also argued that the lack of profitability in liner shipping proved that there was sufficient competition now.
“It’s time we made a profit, even a tiny one.”
Once the lines are in profit, he argued, then they could invest in services and products which would help shippers. But he added: “If we invest in digitisation, then shippers have to too. We need money to invest in services, and that means lower costs and some scale. Then you’d have something to invest.”
Mr Welsh concluded by urging the shipping lines to “reach out to customers” who wanted added value, guaranteed services and KPIs.
“We are all trying to optimise the performance of the supply chain,” he told delegates.
Mr Haeser added: “Fewer players will give us a chance to get closer to shippers, set standards and get reliable business on both sides.”
The Loadstar is fast becoming known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.
Check them out at TheLoadstar.co.uk, or find them on Facebook and Twitter.
Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.
Join the 110,933 members that receive our newsletter.
Have a news tip? Let us know.
Access exclusive insights, engage in vibrant discussions, and gain perspectives from our CEO.
Sign UpMaritime and offshore news trusted by our 110,933 members delivered daily straight to your inbox.
Essential news coupled with the finest maritime content sourced from across the globe.
Sign Up