As Hanjin Falls NVOCCs Rise
As freight rates have dropped substantially on trans-Pacific routes, finding extra space on a vessel has been easier than ever, which has been good for shippers and terrifying for carriers. However, recent months have revealed a small glimpse of hope for the future, at least for eastbound spot rates, but have, as of yet, only netted a small increase in cargo volume for NVOCCs.
However, with the feeding frenzy that has become mergers and acquisitions combined with Hanjin Shipping announcing bankruptcy at the end of August, many NVOCCs are hopeful they can draw in some new business this coming year. According to data analysis from PIERS, volume has already shown a modest increase of almost 2% in the first half of 2016 over the same period last year. Despite a slightly inauspicious beginning, carriers remain hopeful that demand will continue to climb as the market environment continues to restructure itself to fill in the gap.Beyond Rates: How NVOCCs Remain Competitive
To hear it from an experienced shipping line salesperson, an NVOCC almost has a negative connotation to it, something similar to a bottom feeder. “Someone who beats rates lower when they’ve already started to fall, and someone who accepts higher rates when space is tight and is still able to make a profit.” Rooney, however, doesn’t agree with that definition. “It’s a lot more than rates. Our focus is not low freight rates. It’s a package of service and rates. We feel we are competitive on both fronts,” he said.
Perhaps one of the biggest boons to come from the collapse of Hanjin shipping is the fact that capacity has dropped approximately 7%, overcapacity being one of the biggest issues plaguing the industry. As a result, full-service NVOCCs have been helping customers find space with carriers they might not have worked with in the past, including transloading and trucking services as well. “That’s why we’re in business, to solve problems,” Rooney said.
Here, a strong NVOCC like Kuehne + Nagel has an advantage over other companies. It’s not necessarily about offering the lowest price, but more about offering the most beneficial service package to their customers at a competitive price.
Abandoned Ship: Distance from a Sinking Company
The article from the JOC, goes on to explain just how profound the effects of Hanjin’s falling are for the industry as a whole. Many companies, once closely tied to to Hanjin, have experienced a deadfall in volume, such as the case of Pyramid Lines which saw a drop of 86% according to PIERS data as these carriers began to distance themselves from the toppling giant. Many companies, seeing the risk of being associated with such a crumbling partner also withdrew, taking their business elsewhere and leaving their former partner to sink.
The question we have to ask is, just how expensive is loyalty? With its partners pulling out and causing overall volume to drop drastically, the fall of Hanjin was accelerated. Had they stayed, fate might have offered a different path for the South Korean carrier. Yet, looking at the industry as an eco-system, the falling of one is giving rise to others. Many NVOCCs are seeing an increase in business as new customers are relying on their services to help them navigate the troubled waters.
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By: CoLoadX on Oct. 3, 2016, 9:03 a.m.