A leading shipping line executive says recovered materials exporters can expect to see a different global freight environment in the next year. This will substantially affect the current recycling marketplace.
David Arsenault, CEO of Hyundai Merchant Marine America, recently described shipping issues to the members of ISRI’s Paper Stock Industries. He noted several ways the ocean freight industry changed in recent years and how it will change in the near future. For one, he described the impact of the move toward megaships, with some of these massive ships carrying 9,000 40-foot containers. For shipping lines, one benefit was the average cost of handling a container was lowered by about $400. However, the switch to such ships also led to 30 percent over capacity.
Another trend is improved intermodal service. For example, 11 of the 13 Los Angeles and Long Beach terminals now have on-dock railroad capacity.
A third important factor in the industry is the rush toward shipping line alliances. Currently, 93 percent of ocean freight capacity is handled by 16 lines, including Hyundai, which have linked up in four alliances. He contends such alliances help improve timely and efficient service for exporters.
Arsenault pointed out that recycling operators are still confronted with sizable freight barriers. He noted that a severe trucking shortage continues. “We currently need 45,000 more drivers,” he concluded. He also suggested the fact container trailers are more often owned now by leasing firms and intermodal service providers, rather than shipping lines, is an operational concern. A third concern for recycling exporters is U.S. port congestion. This country’s poor U.S. road, bridge and rail infrastructure, and our lack in keeping pace in infrastructure reinvestment in past decade has hurt shipping efficiency.
In terms of freight economics, Arsenault said “cargo volumes are finally back to prerecession levels.” He described his pleasure with low oil prices because “the largest expense in ocean shipping is fuel.” Arsenault also predicted that a wider Panama Canal may finally be in use by late 2016. This will allow much larger ships, including those able to hold 7,000 40-foot containers, to move freight from East Coast ports to Asia. He also sees more terminal automation, with unmanned vehicles moving containers on piers.
Finally, Arsenault predicts that the current overcapacity among the shipping lines will be reduced. He feels “supply and demand will come more in balance in 2016” and “I cannot see rates going lower than they are today,” which are at record lows. “We are approaching the bottom of the rate curve.” One reason is there are fewer idled ships. In the Great Recession, the shipping industry had 600 idle ships at one point. “We’re now seeing a decrease in idle ships to about 350 now,” he concluded.