The capacity on N. Europe-Turkey in particular has increased significantly with CMA.
Lars Jensen, who has worked for Maersk for a long time and was the founder of Sea-Intelligence, said that he expects that the end of the 2M-alliance (in 2025) will lead to the breakup of all big alliances as we know them today. He expects the end of the OCEAN alliance to be announced later this year, which will most likely trigger the end for THE Alliance.
Another interesting topic is a potential merger between ONE and Hapag Lloyd. Hapag is the fifth largest carrier and, if they want to remain competitive, they have little choice but to merge with the Japanese carrier ONE.
None of the above claims has been confirmed by any of the shipping lines themselves. So, for the time being, it is mere speculation about the future.
As pricing out of Asia has seen a steep decrease, many companies are (again) in doubt about how to position themselves toward this market. Several companies (especially in a production environment) still have very high stocks of raw materials and half-fabricates. They have bought these stocks to overcome the risk of additional service and/or production disruptions caused by the logistic challenges during the COVID-19 pandemic and the explosive demand right after the pandemic.
Pre-pandemic a logistics or supply chain responsible who worked based on a high stock was thought of as being ‘old fashioned’ or simply ‘outdated’. The majority of the companies all strive to be as ‘lean and agile’ as possible and the stock was often considered as capital, which was just sitting in a warehouse, costing even more money.
Enter the global pandemic. COVID-19 placed a stranglehold on global logistics and the once-considered ‘old-fashioned’ supply chain manager went from zero to hero. Because of his insights into logistics, he made sure that his company was able to keep on producing while their competitors could not, deliver on time while others were begging to receive their products and keep his logistics spending under control where others were forced to pay unseen (and obscene) amounts of money to get their cargo shipped.
But equally as fast as the rise of our hero, is his fall. The global pandemic got under control in the major driving economies, and this has resulted in the first stages of a normalization of the markets a little bit further down the line in the market situation where we are today with a global crash of demand, the war between Russia and Ukraine and the energy crisis which all lead to overcapacity on the major container trades. As a result, the raw materials or half fabricates in combination with the logistics out of Asia have gone down severely which causes our supply chain manager to have a stock that is overpriced and will cost him money either way. If he used the stock for production, the product would be too high to sell, and it will kill the business. If he doesn’t use the stock he will have to pay the warehousing and the capital which is stuck in the stock cannot be used for anything else.
As nobody likes a sad story, this doesn’t necessarily mean this is the end for our supply chain responsible. Because of the steep decrease in rates, shipping lines are invoking void sailings, re-routing vessels without prior notice (THE Alliance, sailing via Cape of Good Hope instead of passing through the Suez-canal to save money) and some are even suspending entire services. These practices might eventually result in serious disruptions of cargo flows out of Asia again. Potentially making stock management still a very hot topic for the months to come.
The conclusion is that there is no right or wrong policy to apply. Today it is key for a company to have a supply chain strategy that is very agile to act on the constantly changing global logistic challenges. The supply chain models need to be equally adaptive to the dynamics of what is happening in the world and especially the speed at which these changes take place.
For additional questions or remarks, you can always reach out to your usual MPL-contact.