Annual Review and Outlook

Call me an optimist, but I think 2017 should be a better year for the maritime industry. That’s easy to say, right? It couldn’t get any worse.

It may be challenging this year to highlight just one or two changes impacting the port industry. In reality, this sector has been evolving and responding to change for decades. Nevertheless, both the speed and magnitude of the changes we are witnessing today is consequential.

In 2017, we can expect change will continue, but change can be positive. It may provide opportunity for improvement and perhaps an entirely new business model for the future.

Based on the significant development and changes, some largely unexpected, that we have seen in 2016, making predictions for 2017 is a somewhat daunting task.

The complete impact of the expanded Panama Canal and the larger vessels it accommodates is still developing. However, long-term indications are that the service frontier for US East Coast ports will shift westward, especially for nonperishable goods.

Containerized cargo shipping along the east coast of North America is on the cusp of major transformation.

The signing of the EU-Canada Comprehensive Economic and Trade Agreement should bring a positive effect in stimulating a relatively weak cargo demand, set on a background of uncertainties surrounding the longer term effects of BREXIT and the recent US elections (notably on North American trade relations).

It’s no longer enough to develop world-class terminal facilities, believing the cargo will come. We must take an active role in working with our partners to build a rigorous performance management system using real data to drive more informed decisions.

Many players in the industry will be preparing for some important changes in the playing field for 2017, and from these changes, opportunities for operational efficiencies can be expected, improved utilization of assets realized, and more competitive products for customers can be developed.

While the US has looked to the Far East for low-cost merchandise for a number of years, increasingly, we are seeing manufacturers turning to near-sourcing in Central America

I am curious to see how the global economy will be affected by the new leadership/administration we recently elected in the US.

In 2016, we witnessed the start of the consolidation in the liner industry and it should not have been a surprise.

Shippers who use NVOCCs to move their ocean freight have seen a steady increase in their options in recent years, and this important trend will continue in 2017.

We are now in the age of the digital economy.

Without a doubt, the key factors affecting the container trades in 2017 will be consolidation and the creation of three new, major alliances.

There is a need to continuously improve the customer experience around online tools. To do so, investment is required on both the carrier and shipper side around a more structured protocol that can only be done through coordinated forums with the right specialists involved.

A few factors will continue to keep ocean freight rates low. The various container line combinations will not relieve the greatest stress on the industry: too much supply and not enough demand.

Uncertainty is the only thing we can be certain about for 2017.

Labor will be one of the most significant decision factors any company will have in looking at expanding their footprint of facilities and operations.

Over the past year, several countries have shifted their priorities to be more internally focused. Brexit in the UK and the 2016 US election were very publicized examples of this, but the shift has occurred or is occurring in many other countries.

In the United States, an imbalanced warehouse demand-supply ratio is finally leveling out with each delivering 200 million square feet for 2016. Despite concerns and headwinds from slowing global trade, domestic markets look to have a repeat performance for 2017.

Three areas logistics companies will be keeping a close eye on in 2017 are the progression of China's “One Road, One Belt” project, continued growth in the chemical sector, and keeping pace with new technology. The massive (US$1 trillion of outbound state financing from the Chinese government over the next decade) OROB initiative has the potential to significantly impact trade routes and connectivity throughout Eurasia, Africa, and Southeast Asia, with obvious implications for providers of logistic services. OROB and its increased connectivity will be an integral factor in China’s long-term development strategy and foreign policy, as well as the economic growth of the other countries involved. Employment is a major focus in China, and the promise of vast infrastructure job creation via OROB could accelerate its growth. Other factors that might prompt Beijing to push the project into overdrive is its potential to mitigate overproduction, extend inland an economy that is currently concentrated along shorelines, and reduce dependency on external natural resources. The global chemical logistics market is forecast to grow 12 percent over the next several years, and we have already seen the impact of these projections in 2016. This trend has piqued the interest of private equity firms, and we have seen major M&A activity. This has resulted in some interesting spinoffs, with larger companies splitting into smaller divisions highly focused on specific end-markets. Chemical companies are approaching increased demand strategically, carefully considering factory locations, and embracing new technology, including predictive analytics, 3D printing, automation and the Internet of Things for digitally interconnected plants. Indeed, this ever-evolving technology is permeating every manufacturing sector. For logistics companies, it means focusing on integrated planning and execution systems, end-to-end visibility, procurement 4.0, smart warehousing, efficient spare parts management, autonomous and B2C logistics, prescriptive supply chain analytics, and digital supply chain enablers.

In 2017, the pace of innovation will continue to speed up. Large enterprise organizations will continue to announce strategic partnerships with smaller tech enabled start-ups, which will further increase the speed of adoption.

2017 looks to have an exciting focus on digitization. The spotlight is shining brightly on this subject as companies look to achieve the productivity and performance benefits that come from digital solutions.

US containerized imports stayed on an upward trend in 2016 despite strong headwinds.

BCOs should plan on working with the carriers to arrive at a balanced rate structure that we can all live with, so ocean shipping can remain intact.

Technology will continue to improve velocity and efficiency across the supply chain.

The focus for the year 2017 will be the promotion of data analysis as a sinew for customs modernization.

Ahead in the Trump administration and Congress, the Waterways Council will advocate for inclusion in a potential infrastructure stimulus bill that could be kicked off early.

Most companies and industry groups involved in international trade are understandably anxious about President-elect Donald Trump’s anti-trade rhetoric.

Buckle up, 2017 will be a very bumpy journey.

As the Trump administration takes shape, the potential impact of the negative trade rhetoric heard during the campaign on the US international trade community is a concern.

The primary question for international traders right now is what’s next?

The International Chamber of Commerce is revising its Incoterms® rules.

Two major supply chain disruptions in the past four years have taught us some invaluable lessons.

Despite the apparent demise of the Trans-Pacific Partnership, I don’t think the Trump administration will abandon existing and future trade agreements.

There is no doubt the shipping industry will continue to face challenges in 2017. The logistics world is ever changing. How we address and manage these changes are our biggest challenges.

Today’s markets confirm that international trade remains sluggish, although the ratio does vary trade by trade. The third quarter of 2016 for imports from China is generally been the busiest period for this industry as retailers stock up on goods for the beginning of the school year and the winter holiday season. For exports, the fourth quarter is busy for end-of-year profits, and expectations may be moderate at best. The North Atlantic has little or no cargo moving. This has never happened before, showing a terrible economic signal. Cargo exports to West Africa have slowed because of government restraints on letting money out of the country. Let’s hope recent elections will bring a positive impact to change the economic waters. One out of every six jobs in the US is maritime related. The oceans are an important part of American life, as nearly 80 percent of US imports and export freight is transported through our seaports. How important is ocean transportation to our economy, a system that carries 95 percent of US foreign trade? Very important. Let’s hope for 2017 that the shipping industry is not sinking, and let’s keep focused going forward to an economic revision in 2017. With the new elections, hopefully sanctions with Russia will be eased by the second quarter. This will open a new corridor for global trade that was missing in 2016. This will definitely be a stimulus to international projects, adding to the economy and the shipping industry for 2017.

One of the most important changes we can expect to see in our industry in 2017 is further consolidation in the ocean freight market. With that comes some uncertainty, but we can expect to see a slight reprieve in increasing shipping rates providers have been experiencing since the collapse of Hanjin. While rates are not predicted to decrease substantially, stabilization should occur after Chinese New Year. However, providers can expect that once rates flatten, they will be higher than what we have experienced in the last year or more. Unfortunately, Hanjin’s situation may not be an isolated incident. Logistics providers should learn from the Hanjin experience and readjust their risk management systems. Taking corrective action prior to a crisis can ensure that a customer’s cargo is not stranded on a container at sea. Providers should pre-emptively move shipments to more stable carriers. In addition to rate increases, many importers have experienced delays and interruption of their supply chain as carriers experienced a capacity crunch. To manage delays, it’s essential that logistics providers work with their customers to ensure advanced booking of space by using the best forecasting tools for visibility and forward planning of weekly movements. Proper planning and forecasting is key to an uninterrupted supply chain. It will also be important for the supply chain industry to monitor the political developments worldwide in terms of changes in regulations and long-term potential shifts in the manufacturing industry, which could impact trade.

We expect to continue to see a challenging economic environment going into 2017. Economic cycles are occurring with greater volatility and unpredictable duration, which makes it harder to forecast accurately.