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Thursday, Dec 7, 2023

What factors driving the growth of container shipping market

Few players in the shipping market have been struggling with financial problems, while others have strong balance sheets with a periodic inflow of funds and trade. Those with large container vessels as well as new engine technology has been proven to have resulted in more steady and continuous business growth. The container shipping market has been strategizing their operations to make them have low operating costs and high efficiency. As a trend, carriers are investing in building large container vessels alongside establishing associations with fellow carriers in order to maintain relevance.

Following are the trends and various factors associated with the container shipping market:

  • Lowered demand from shipping routes from Eastern economies

China has been witnessing rapid fiscal growth in the past decade due to tremendous growth in the global trade incidences. This has directly impacted the container shipment trade. Although there have been few geopolitical skirmishes in Chinese waterbodies, shipment has been affected negligibly.

  • Overcapacity in the container segment and not specifically matching financial cycles of the shipping industry

As one of the most important aspects of the demand-supply equilibrium is timing, the container shipping components of 14000 TEUs need to fit into the global financial cycles in order to derive favourable returns on their investment costs. The industry is experiencing price volatility which is compelling carriers to make sure they do not violate global laws pertaining to overcapacity.

  • Nordic countries requiring fewer containers which have low capacities

World crises affect the global container shipping market and this is the reason the containers to be transported to the Nordic countries such as Russia and northern parts of Finland as well as other Baltic countries are in a reduced number.

  • Utilization of ports

The increase in the number of ports and port facilities is leading to a rise in the number of shipments worldwide. As a trend, there are often conflicts and congestions on ports from 20 000 TEU container ships, the ports are incorporating newer, more innovative plans to efficiently manage the carriers responsible for imports and exports.

  • Growth from developing countries is increasing the demand for containerized cargo

The future of the container shipping market is expected to see a rise in the demand for containerized goods and products. China, especially, is expected to participate proactively in this trend. For instance, countries such as Africa, Nigeria and India which have a collectively large share of the population are in close trade ties with China and have signed Memorandums of Understanding (MoU) that govern container shipping for the coming decade.

The paper industry, for example, prefers products which are containerized as per the size of the paper. After this, the cargo is directly transported from the ship/port to the end-user. Containerization has proven to eliminate the role of middle-men which packages the good into a durable product fit for intra-country transportation. Containerization also reduces the risk of theft and misplacement as the transported goods carry the end-destination address at every stage.

The ocean freight industry which is dominated with large vessel container ships is dependant on factors such as drafts at ports, the volume which can be handled as well as the robustness of the supply-chain technology. Increased geopolitical mobility of goods and services is causing rapid expansion of the container shipping market.

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