Line withdrawals put global supply chain in jeopardy

The entire global supply chain will come under threat as struggling carriers withdraw from unprofitable trade lanes over the coming years, according to one expert.

Speaking at the TOC conference in Bremen last week, Mark Page, director of Drewry Shipping Consultants, said that in the short- and medium-term future, shipping lines would come under continued financial pressure because of low rates caused by an imbalance between supply and demand.

This may lead to shipping lines withdrawing from trade lanes - as Zim, Pil, Wan Hai and CSAV have already done on the Asia-Europe trade - putting the supply chain at risk.

So far this year, 32 strings and 187 containerships have been removed from the four main east-west trades, Page explained.

"In the short and medium term, this imbalance [between supply and demand] is not going to change," said Page.

"Carriers, and those that deal with them, either service providers or service users, will have to adopt radical strategies to get through the next few years as imbalances that have been created in liner shipping are not going away in the near future.

"If the demand collapse wasn’t bad enough, we’ve got a torrent of new capacity to deal with and that will be very difficult to change in the next 12-24 months.

"We are going to be in a market where the rate book is going to be challenging for years to come."

He said that based on the financial results for the first quarter, container shipping could potentially lose US$20bn this year.