Wednesday, June 6, 2018

So What is The Future for the Global Container Shipping Industry?

Report Looks at the Next 25 Years for the Ubiquitous Metal Box
Shipping News Feature
UK – WORLDWIDE – Analysts come in varying degrees of competence but when the TT Club produces an opinion it is always worth listening to. The nature of the marine insurance business means the quality of raw data is incontestable and therefore a new report, produced in conjunction with global management consulting firm McKinsey, to look at what the future may hold for the container industry over the next 25 years, to coincide with the 50th anniversary of the Club, and the acceptance of the now ubiquitous boxes, is worth more than a second glance.

However in this case the report, entitled ‘Brave new world? – Container transport in 2043’, is a wide ranging qualitative summarisation of the passionate thoughts and opinions of industry leaders rather than the quantitative research and analysis of trends one would normally expect. The authors of the report interviewed over 30 highly respected industry leaders and experts from a wide cross section of the industry. The aim was to gain a qualitative insight into the perceptions and confidence of the people who have greatest experience in the industry and are best placed to predict the sector’s future.

Those interviewed included Board Members of TT Club, but importantly also a range of other supply chain professionals, financial intermediaries, law firms, and disruptors and innovators. The research obviously produced a range of views and therefore the authors have drawn five broad conclusions as to where the industry is going and then have examined four specific potential future scenarios together with their implications. Two of these scenarios centre on digitalisation and two on trade development, or the lack of it.

When the age of containerisation dawned very few would have predicted not just its success, but the way it has evolved into the essential cargo carrying unit we see today. Now from a simple design we have a range, from flat racks, through reefers, open top and oversize to even door less containers. Over 90% of globally traded consumer goods come in a container, yet despite this success, the returns for the average container liner operator or freight forwarder have lagged behind the cost of capital over the last two decades. There have only been a few winners who have found a sustainable recipe for value creation.

The report produces five possible outcomes as the experts perceive it:

  1. The physical characteristics of the industry are unlikely to change, as the containers and the ships that carry them will still exist over the next 25 years
  2. Trade flows will become more balanced across trade lanes as incomes converge between East Asia and developed economies, and the emerging economies in South Asia and Africa ‘catch up’
  3. Automation will be broadly adopted across the value chain, especially on the landside in ports, terminals, rail and trucking, to unlock significant efficiencies
  4. Digital, data, and analytics will cause a fundamental shift in the sources of value creation and customers will expect a high level of reliability, transparency and user-friendliness
  5. The industry leaders in 2043 will look very different; some will consolidate, others may change their business model. Some will be ‘digital natives’, either start-ups or e-commerce players optimising the container transport leg of their supply chain
The report goes on to debate as to whether the future is fundamentally driven by trade or by digitalisation and, from this, the authors derive four possible outlooks for the future in thought-provoking articulation. Charles Fenton, Chief Executive Officer, TT Club, commented:

“TT Club was founded in 1968 by some of the early adopters of the unitisation of cargo, the container. We have been keen to mark our 50th anniversary of the start of a Member-owned, mutual insurer by launching this report. From inception, TT Club has had a philosophy of listening to its Members and sharing their experiences to make the industry safer and to minimise risk whilst lobbying for and embracing change when and where it’s required.

“The container’s simplicity and modularity has made it the mode of choice for transporting many goods across the globe. This examination of the wisdom and perceptiveness of the industry’s opinion formers is, we believe, relevant in exploring how such strengths will develop the container transport environment by 2043.”