It’s no secret that global trade is slowing down as the world’s container fleets are struggling to keep up with the demand for carrying goods from nation to nation. The only way to combat this phenomenon, it seems, is through facilitation on a larger scale and international cooperation.
What should happen to Cargo?
But there are some big questions that need answering before proceeding, and one of these is what should happen when cargo ships are forced to cancel sailings due to a lack of cargo? In order to find an answer, one has to look no further than recent history.
Today we’re taking a look at three important past events and how the maritime industry responded.
The first event we’re looking at is the Panama Canal’s deregulation throughout the years.
The Panama Canal was built in the early 20th century by the United States and essentially served as a waterway between its North and South American brother nations. The canal was renovated several times throughout the years, but what really made it stand out from other such construction projects was its large number of locks that were able to accommodate the largest of ships. The canal also included a top-side railway for trains to run across it on its way from the Atlantic to the Pacific sides.
With its unique size, the Panama Canal encouraged a whole new class of containerships that could not pass through other similar structures. These massive ships, known as Panamax vessels, could transport over 6,000 TEUs each within their holds and were available in a variety of designs.
In the 1960’s, commercial airlines were given permission to move goods and passenger traffic at the same time—this meant that the railway section was no longer required for shipping purposes. This led to the Panama Canal Treaty in 1979 between Panama and the United States, which effectively deregulated it—this is why ships of all shapes and sizes can now pass through it freely.
The deregulation proved to be a great success as it allowed for the growth of many maritime companies. With the canal now open to all sizes, shipping costs were able to drop significantly, especially when compared to transiting the Suez Canal. This was very beneficial for companies that shipped through ports on both coasts of the U.S.
However, with its uniqueness came some problems. It didn’t take long for new ship types to appear that were designed specifically for the Panama Canal and Panamax cargo vessels quickly became obsolete—this led shipping lines to look for alternative routes and port calls around the world.
Further analysis :
The newest indication of the economic whiplash affecting businesses as inflation weighs on international trade and consumer spending is the fact that ocean carriers are canceling scores of sailings on the busiest routes on the globe during what is usually their peak season.
The cancellations in October represent a stark reversal from a few months ago, when a lack of shipping capacity drove up freight prices and carriers’ earnings to all-time highs. Businesses like Walmart Inc. and Home Depot Inc. were chartering their own ships in October of last year to get around port delays caused by an increase in demand for imports.
Trans-Pacific shipping costs have fallen by around 75% from last year’s levels. The transportation sector is struggling with decreased demand as major retailers increase attempts to reduce stocks and cancel orders with vendors. FedEx Corp. recently announced that due to a dramatic decline in delivery volumes, it will cancel flights and idle cargo planes. Nike Inc. announced on Thursday that it would use markdowns because it had 65% more inventory in North America than a year prior.