'Reckless cascading' not shipper gouging causes rates to plunge: NVOCC
"RECKLESS cascading" of ships into trades that couldn't sustain them, is why Hanjin Shipping collapsed and rates plunged on almost every trade, according to leading UK liner agency Kestrel Global Logistics boss Andy Thorne.
Mr Thorne said it was 'deeply worrying" there were attempts to blame forwarders, shippers, and his fellow NVOCCS for unsustainable rates and Hanjin failure, Lloyd's Loading List reported.
"Carriers created the situation that allowed NVOCCs and shippers to take advantage of them. Shipping lines created a platform that allowed freight rates to collapse by cascading smaller ships into trades that couldn't sustain them.
"I'm not saying they haven't taken advantage of low rates, but not a week goes by without a line calling one of my companies offering a special deal; this is always lower rates," he observed. "When this is happening globally, what does it mean for the future of the box and agency business?"
He said that until 10 years ago, liner supply and demand was fairly balanced on most trades, most of the time. However, the desire of the leading lines to deploy ever larger ships on Asia-Europe and transpacific services led them to recklessly cascade ships onto smaller trades that could not sustain the extra capacity as their new ULCCs entered service.
"Take Europe-East Coast South America," he explained. "This was fine with 4,000-5,000 TEU ships on it. But when lines realised that ships of 10,000-15,000 TEU capacities were too small for Asia-Europe, they moved 10,000+TEU ships to Europe-ECSA and doubled capacity. The results were predictable."
He said this had happened "on almost every trade globally" except perhaps some smaller trades to the Caribbean.
Mr Thorne said the die was probably cast for liner troubles as long ago as 2008 and the global financial crisis. "That was when the snowball was thrown from Everest," he said.
"Instead, a platform was created which from 2011 saw bigger and bigger ships coming down the pipe and this couldn't be stopped. So now we're out the other end with all these ships laid up, but nowhere to go.
Mr Thorne said Kestrel Group did not suffer from the fallout of the Hanjin Shipping bankruptcy after anticipating the line might run into trouble some six months ago. "We heard rumours and also we read about it in the likes of Lloyd's Loading List, so we put out a notification not to book with Hanjin," said Mr Thorne.
"I was surprised so many people were caught out, because the writing was on the wall."
"RECKLESS cascading" of ships into trades that couldn't sustain them, is why Hanjin Shipping collapsed and rates plunged on almost every trade, according to leading UK liner agency Kestrel Global Logistics boss Andy Thorne.
Mr Thorne said it was 'deeply worrying" there were attempts to blame forwarders, shippers, and his fellow NVOCCS for unsustainable rates and Hanjin failure, Lloyd's Loading List reported.
"Carriers created the situation that allowed NVOCCs and shippers to take advantage of them. Shipping lines created a platform that allowed freight rates to collapse by cascading smaller ships into trades that couldn't sustain them.
"I'm not saying they haven't taken advantage of low rates, but not a week goes by without a line calling one of my companies offering a special deal; this is always lower rates," he observed. "When this is happening globally, what does it mean for the future of the box and agency business?"
He said that until 10 years ago, liner supply and demand was fairly balanced on most trades, most of the time. However, the desire of the leading lines to deploy ever larger ships on Asia-Europe and transpacific services led them to recklessly cascade ships onto smaller trades that could not sustain the extra capacity as their new ULCCs entered service.
"Take Europe-East Coast South America," he explained. "This was fine with 4,000-5,000 TEU ships on it. But when lines realised that ships of 10,000-15,000 TEU capacities were too small for Asia-Europe, they moved 10,000+TEU ships to Europe-ECSA and doubled capacity. The results were predictable."
He said this had happened "on almost every trade globally" except perhaps some smaller trades to the Caribbean.
Mr Thorne said the die was probably cast for liner troubles as long ago as 2008 and the global financial crisis. "That was when the snowball was thrown from Everest," he said.
"Instead, a platform was created which from 2011 saw bigger and bigger ships coming down the pipe and this couldn't be stopped. So now we're out the other end with all these ships laid up, but nowhere to go.
Mr Thorne said Kestrel Group did not suffer from the fallout of the Hanjin Shipping bankruptcy after anticipating the line might run into trouble some six months ago. "We heard rumours and also we read about it in the likes of Lloyd's Loading List, so we put out a notification not to book with Hanjin," said Mr Thorne.
"I was surprised so many people were caught out, because the writing was on the wall."