Rate Correction for Ocean Cargo Expected in 2017
At the end of 2016, cargo imports surged. Retailers had experienced strong holiday spending and were stocking up on inventory for 2017. The increased container cargo volume was a welcome change from the lows of 2016, when overcapacity and weak demand caused rates to drop to the lowest they had been in years. This even caused the Hanjin Shipping Co. bankruptcy and consolidation at several large carriers. Economists predict rate correction for ocean cargo in 2017, but uncertainty still remains.
Improved Health at Ports in 2017
Manufacturers are starting to fill excess capacity and leveling out demand at ports around the world. Panjiva, a research firm that tracks trade data, discovered an 8.9 percent increase in United States-bound seaborne shipments in December 2016 over the previous year. This is partially due to holiday spending, but it’s also because West Coast ports are also finally recovering from the damages of labor disputes in 2016. Another factor in the increase in cargo volume is that retailers are worried that rates will increase drastically in the spring, and they want to get a head start on volume at the lower rates.
Many economists were surprised at the increase in import volume because of political uncertainty across the globe, such as a new presidency in the U.S. and impending Brexit in the U.K. However, holiday sales were strong, and consumer confidence is still on the upswing. Unemployment rates in the U.S. are down, and people are starting to recover from the recession. The political climate often affects import volume, but it isn’t currently causing a negative impact.
Ocean Cargo Rates Are Rising Steadily
Ocean cargo rates have been historically low in 2016 because of overcapacity at ports and weak demand. As conditions improve, some rate correction will take place. Ocean cargo rates are already rising steadily and could remain high in the spring. This is good news for ocean carriers that have been struggling over the past few years.
Several ocean carriers have consolidated and merged in recent history because of struggles in the shipping industry. One of the most notable instances was the bankruptcy of Hanjin Shipping Co. More mergers and alliances are expected in 2017, which could further boost ocean cargo rates.
Predictions for Ocean Cargo in 2017
Even though it isn’t clear how new trade policy in the U.S. or political uncertainty around the world will affect ports, 2017 will likely be a good year for ocean carriers. Rate correction and higher volumes will likely make headlines. Retailers should prepare to pay higher rates and prepare for possible shipping delays as demand levels out at ports.
The shipping industry as a whole is recovering, but it may be too late for some ocean carriers. For instance, Yang Ming is still struggling to avoid bankruptcy. The company has a financial recovery plan, but the slow pace of recovery to this point may spell trouble for the ocean carrier. Many other carriers will likely also merge to avoid going out of business entirely.
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