Latest news from Heavy Lift & Project Forwarding International Magazine

Heavy Lift Across the World

Cargo owners advised to adapt contract strategy

September 6 - International transport and logistics executives using container shipping are facing the biggest shift in their ocean provider base for 20 years and must adapt their procurement and contract strategy, says ocean freight procurement consultan

Drewry says that over the last five years, beneficial cargo owners (BCO) have been able to secure large reductions in freight costs by running traditional competitive bids with numerous providers in an over-supplied, fragmented market.

Now, Philip Damas, head of Drewry's logistics practice, says: "Today's business environment is starkly different, so we are now proactively advising our BCO customers that last year's contract strategy will simply not work as a blueprint for the forthcoming annual ocean tender. Things will be different and organisations must be prepared.

"Rapid consolidation in the supplier base, changes in supplier behaviour, huge reductions in vessel orders and new developments in tender technology will bring real change and uncertainty to the ocean transport procurement environment," he added.

For example, on the Asia-North Europe route, the number of containership operators (excluding slot charterers) will decrease from 15 in July 2016 to 11 in July 17 to just 8 in July 2018, says Drewry.

Globally, in 2016, orders for new containerships decreased from USD17 billion in 2015 to USD2 billion in 2016. On the other hand, the capacity of new containership deliveries is expected to increase from about 900,000 teu in 2016 to 1.1 million this year. The bankruptcy of Hanjin Shipping in 2016 has highlighted the performance risks of some financially weak providers and some BCOs and ocean carriers are experimenting with new contractual models.

Drewry says that annual contracts being renegotiated on the Asia-North Europe and Asia-US West Coast routes are typically seeing container annual freight rate increases of about 50 percent, although it acknowledges this is from a low base.

In such a market, Drewry believes that BCOs will need to re-think their contract negotiation strategy and believes that, by incorporating benchmarking and e-sourcing best practices in their tender management process, rate increases can be mitigated. Use of big data and optimisation can also help find the best combination of bids to meet the intended balance between cost and service for the BCO's many different lanes or supply chains.

BCOs could also face more frequent potential issues from roll-overs and cancelled sailings in the medium term. In early 2017, European exporters suffered shortages of export shipping capacity to Asia, at a time when quarterly volumes to China were running 18 percent higher than in the first quarter of 2016.

 

www.drewry.co.uk

Heavy Lift | News

Bravo for Pioneering Spirit thumbnail image

Bravo for Pioneering Spirit

June 19 - Allseas’ installation and decommissioning vessel Pioneering Spirit has removed the 25,000-tonne Brent Bravo topsides from the North Sea.
Views: 197
Brett joins port of Tyne thumbnail image

Brett joins port of Tyne

June 18 - Simon Brett has joined the UK’s port of Tyne as commercial director of port services.
Views: 394
Apollo completes refit at DSDu thumbnail image

Apollo completes refit at DSDu

June 18 - DEME Offshore’s latest heavy lift jack-up vessel Apollo has completed a one-month conversion project at Damen Shiprepair Dunkerque (DSDu).
Views: 302
Cargolux adds Santiago call thumbnail image

Cargolux adds Santiago call

June 18 - B747 operator Cargolux Airlines has re-introduced Santiago de Chile as a call on its South American service.
Views: 336

Heavy Lift Across The World

Discover heavy lift and project logistics industry news from around the world by region.