The global trade industry was evolving at a regular pace for years, with innovation and technology being introduced that facilitated improved operations. The past couple of years, however, have been problematic for the industry, forcing new ways of thinking that are redefining international commerce. Jason Simon, a FinTech and global trade expert, explains how the global shipping industry has been forced to adapt rapidly to changes and what lies ahead.
One of the best examples of the global trade industry is Maersk. The shipping giant moves around 20% of all containers being shipped by sea and has witnessed substantial growth recently. In the first quarter of 2020, its revenue was $9.6 billion, and this increased to $12.4 billion a year later. However, from a company perspective, it wasn’t all good news. Explains Simon, “There is going to be an increase in global sea shipping and the problem is that container ships are now operating at full capacity, as are ports. There will likely be more issues coming over the next couple of years that will exacerbate an already precarious situation.”
The issue began two years ago when new trade tariffs were being introduced by the US government. That led to commercial businesses pushing out more exports so they could reach their destination ahead of the start of the tariffs. This led to issues at ports that couldn’t handle the demand, with many ships waiting up to three times as long to unload. Then, COVID-19 hit and shipping was forced to slow down as international travel of all types was halted and consumers weren’t purchasing. However, shortly after, as more people were forced to stay home, demand started to increase again, especially in the US, jump-starting new growth. Today, some ports receive 18% higher amounts of traffic than they did pre-COVID-19. With ports already behind schedule, they have to try to adjust their operations once again to keep up.
The fluctuations have made it more difficult to adhere to timetables and routes. Adds Simon, “The 11 largest shipping lines saw $13.3 billion in operating profit in the second half of 2020 as consumer demand exploded almost overnight. Ships are moving $4 trillion in products each year and, even though they have tried to forecast operational protocols so they align with consumer demand, the challenges over the past couple of years have made it virtually impossible.”
When container ships were first introduced, they typically carried 58 containers. However, now they carry 23,964. As a result of the growth and the recent issues facing the industry, there is a greater push for autonomous ships that can ease logistics and shipping. Some fully automated vessels are starting to emerge and, in some ports, automation is beginning to take over. With these changes in mind, global trade is going to go through a major metamorphosis over the next few years that will alter the industry permanently.