2020 was a tough year for everyone. The pandemic created a lot of uneasiness and complications for many industries, including the shipping industry. Shipping companies had to become agile and adaptable to these changing times and focus on creating successful response strategies and plans.
Maritime trading experienced about a 4% plunge in 2020 according to the United Nations Conference on Trade and Development, with a large decline in demand for international goods.
This ended up developing a ripple effect on everything from oil tankers to shipping containers.
Initially, January didn’t experience much of an impact on the industry when the virus started to spread. Only a minor fall in demand was felt as ports in China and nearby countries started functioning at limited capacity.
Despite the prolonged struggles happening in Asia, it wasn’t until February where the global shipping sector started to suffer the true impact of the Covid-19 pandemic. This was the start of the global crisis across all sectors, hitting the shipping industry with slow demand in goods’ production, exports, and oil.
Experts predict that these shockwaves will continue to be felt through supply chains, shipping networks, and ports in 2021.
What are the future trends in the shipping industry?
While the statistics seem daunting, the pandemic and the shipping industries’ evolution created multiple shipping trends that will show themselves more and more in 2021 within the maritime industry. These trends will prepare the shipping industry for the ever-evolving times we are living in and help match consumer and business trends in the market today.
Continuous improvement efforts will help reach company supply chain goals as well as societal goals, like sustainability efforts. All in all, shipping can generate a big impact on the world through some of these trends:
High freight rates
Due to increased demand in comparison to 2019, ocean freight rates tripled from the average price levels. Ocean carriers issued record profits in 2020 after many years but this type of unusual increase is not sustainable. 2020 saw implementations of higher rates by carriers under premium services.
Since there are no planned additions to the current vessels coming into the market in 2021, the possibility of higher freight rates could occur, but reports have indicated that importers are prepared to pay the higher rates.
The chances of seeing differentiated service offerings for carriers are high in 2021. Surefire loadings, improved customer service support for premium services, and early and faster discharge with a specific area to pick up the chassis in ports have been tested and are already in place.
The days where one size fits all types of services owned by the shipping industry are long gone. These differentiated and catered services will be more widespread and eventually will lead to other industries.
Increased carrier discipline
In 2020, even during the most unprecedented times of the pandemic when cargo volumes were at their lowest, the same thing didn’t occur with freight rates. This happened because of the more disciplined carriers that controlled the capacity much better by cutting capacity by reducing costs, taking advantage of lower fuel costs, and concentrating on profitability rather than just market share.
This resulted in spot rates being stable, even at the peak of the pandemic when there was less cargo. Carrier discipline is expected to continue in 2021.
One positive result of the pandemic was the movement to embrace technology in ocean shipping, something already seen in many other industries.
The amount of exciting technological developments continues to grow, and we will see more of them in 2021. The industry has welcomed technological developments slowly but surely.
Digitization of the supply chain and more reliable platforms where instantaneous tracking and tracing are offered are almost a given now. Smaller-size companies that cannot keep up with this trend will diminish their competitive edge.
The rise of shipping platforms
Implementations of blockchain, Big Data, and AI will also see more discussion in the latest technology in the shipping industry, in addition to the widespread usage of shipping platforms. Advanced technologies will drastically increase efficiency and give an extremely competitive edge to the companies that fully embrace these new developments.
Increased digitalization, however, also comes with increased cybersecurity risks, something that companies will need to pay attention to in 2021.
Shorter supply chains
As companies saw the plentiful risks of outsourcing during the Covid-19 pandemic, there is a strong likelihood for supply chain shortening, including nearshoring and reshoring, with less reliance on lean and just-in-time inventory models.
Digitization of the supply chain and real-time tracking and tracing is also almost a given now.
Cleaner and more sustainable shipping
Sustainability will be an important driver similar to cost-cutting and market share increases. It will play a large role in the shipping industry’s profits as greenhouse gas emissions from international shipping are still one of the top contributors to global pollution.
The shipping industry has placed ambitious goals in place to reduce total greenhouse gas emissions by 50 percent by 2050 in comparison to 2008 levels, as well as become less reliant on traditional energy sources. Low sulfur fuel usage regulation was and continues to be a large goal for the future as sustainability becomes a major conversation point in the industry.
What is the future of the shipping industry?
While 2020 brought a lot of terrible news and disruption to society and the shipping industry, specifically, there are many new and exciting trends to be optimistic about. Shipping never took a major hit during the pandemic, a fear that was widespread across the industry, proving that shipping is here to stay and will continue to evolve with the changing times.
With volumes returning to a more systematized manner, importers and all industry stakeholders will be much more prepared in 2021 and the future of shipping is destined to thrive.