The new state of international logistics

An analysis by winebroker Angelo Cotrone from Ciatti.

International logistics are under pressure / Credit: Astre
International logistics are under pressure / Credit: Astre

For years, the industry was forecast to have the best growth potential, but then came the financial crisis in 2008 and the subsequent collapse of the global economy. Since then, there has been no real economic recovery. This has also inevitably made itself felt in international sea freight traffic. Container shipping went into crisis. New freighters that had already been ordered were nevertheless built and put into operation, which led to overcapacity and, as a logical consequence, to falling container rates. 

This resulted in merciless predatory competition, and for the shipping companies this meant continuing and dramatic losses. For small and even medium-sized shipping companies, there was hardly any chance of survival under these conditions. Meanwhile, the concentration process continues to progress. Five large competitors, which today already represent a third of the market, are likely to determine the market even more clearly in the future: Maersk, China Cosco, CMA CGM, Hapag-Lloyd, MOL/NYK Line/K Line. 

In order to avoid losses and become profitable again, capacities or voyages were cancelled. In addition to the capacity cuts, European and US companies shifted larger parts of their production to China and Vietnam, which were able to quickly contain the Covid 19 virus. At the same time, shipping companies have since reduced the oversupply of their container carriers that arose with the financial and economic crisis of 2008.

Now, a growing demand for transport capacity is meeting a significantly reduced shipping volume. This is causing freight rates to explode. According to calculations by the financial news service Bloomberg, container transport costs on the Asia-Europe line shot up from 1,500 US dollars last summer to the current 5,200 dollars, with spontaneous, urgent bookings sometimes paying 5-digit amounts.

The wine world has a strategic disadvantage: wines do not cost millions, only producers of correspondingly expensive goods can worry about container rates in the five-digit range, in the wine world it is often a matter of cents. If rates are significantly more expensive, most people drop out, others then get the surcharge and are loaded.

Angelo Cotrone is winebroker at Ciatti Global Wine & Grape Brokers

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