Shared some insights hot topics in container shipping supply chain by then "Crunch time approaching fast for ports and terminals as shipping alliances look to cut costs" Full edition at https://canadiansailings.ca/documents/weekly_issue/feb_2017/feb_20_2017.pdf

1. PublicationsMailAgreementNo.41967521
www.canadiansailings.ca
February 20, 2017
sailings1085.qxp 2017-02-21 8:23 AM Page 1

2. 26 • Canadian Sailings • February 20, 2017
TERMINALS AND
CONTAINER SHIPPING
Crunch time approaching fast for ports and terminals
as shipping alliances look to cut costs
BY ALEX LENNANE
and cheaper. People tell me they are cutting
costs – but where? It’s in maintenance and in
training, and they are not updating proce-
dures.”
TT Club statistics show that 73 per cent
of accidents come from operational errors –
which could be mitigated by training, Lack of
maintenance leads to 16 per cent of acci-
dents, while lack of contingency planning for
events such as poor weather make up the last
11 per cent. “So where can you cut costs?”
he asked. “A quay crane costs a lot of money,
up to $10 million. If you spend $8 million or
less, you didn’t buy the right one. If you buy
cheap, you pay twice.”
He said 26 per cent of all operational
claims came from crane malfunctions, mostly
bumping into ships. “It costs $15,000 to
install technology on a crane which prevents
The next big losers in the shipping
industry crisis are likely to be ports and termi-
nals, leading to a decline in safety and
services.
At TOC Middle East, held in December,
shippers, analysts and forwarders urged the
sector to halt the price race-to-the-
bottom across the supply chain, to protect the
remaining players. “The Hanjin episode
served as a wake-up call – this is not a sustain-
able way of doing business,” Alessandro
Menezes, Associate Director, transportation
sourcing, at petrochemical shipper Vinmar,
told delegates. “There is a risk factor for ports,
with 80 per cent of the world’s fleet in
alliances. If alliances squeeze prices too tight,
terminals can’t invest.” He added that ship-
ping lines should re-evaluate their own
pricing structure to mitigate the risks down
the chain. “Freight rates should be based on
value, not cost.”
But Praveen Joseph, Regional VP, Ocean
Freight for DHL Global Forwarding, said part
of the problem was customer behaviour.
“Low freight rates are not just caused by over-
capacity, but customer behaviour. Customers
have saved about $23 billion since 2010 – but
have they considered the high cost of low
prices?” he asked. “Lines have to cope with
extra costs like repositioning and no-show
bookings. They no longer control cargo flows
and carriers then have to cut costs, and that
leads to blanked sailings. Which leads to far
higher supply chain costs. A commoditized
product leads to service decline.”
In the ports industry, a squeeze on prices
would lead to a decline in safety, according to
the TT Club. Director Julien Horn noted that
alliances had been formed to cut costs and fill
ships, putting greater pressure on ports and
terminals. “Ports are being asked to be better
Photo:AndresRodriguez
this,” he advised, adding that while most acci-
dents could be covered by insurance, there
were other costs, such as reputational
damage. “Be better, not cheaper,” he said.
Mohammed Al Mualiem, Managing
Director of DP World’s UAE region, said
working with partners across the supply chain
would alleviate some of the challenges, along
with investment in new technologies. “How
can we improve in the face of these challeng-
ing times?” he asked. “We need to look and
be creative… It’s a matter of survival. The
world is under stress.
“For us, the way forward is very clear:
collaboration, technology and optimizing
resources.” He called on the industry to work
better together for the benefit of all. “We need
to be together at every supply chain link. We
should look at areas where we can improve,
be more productive and efficient and remove
barriers so we can help each other go for-
ward.”
But Lars Jensen, CEO of SeaIntelligence,
told The Loadstar on the sidelines of the con-
ference that some ports could face financial
hardship in a few years, leading to the possi-
bility of a previously unheard of event: a port
bankruptcy.
Reprinted courtesy of The Loadstar
(www.theloadstar.co.uk)