Excess Shipping Capacity: Good or Bad for Business?

Excess Shipping Capacity: Good or Bad for Business?

When it comes to shipping, supply is outstripping demand. This is a consequence of the current volatility of global markets and the continuing downward trend of oil, steel and other commodity prices.

“The average cost of transporting international goods looks to be coming down even further than it already has”, comments Chris Houghton, of Freedom Logistics, in Stockport. “This adds to a sense of volatility as supply is greater than demand and carriers will seek to address the consequent fall in prices by taking action”.

The key question for exporters is what this action might be. The initial symptom of excess capacity in shipping is a general lowering of costs, though this actually has its ups and downs.

“Average prices are falling but prices vary greatly”, Chris explains. “This makes budgeting and price benchmarking increasingly difficult for shippers”. In other words, it is one thing to have a period of generally falling shipping costs; it is quite another to be able to take full advantage of it.

There is a general air of unpredictability around much of the world’s economic activity at the moment, and the shipping market is no exception. With prices rarely staying still for long, and shipping lines looking to shed their excess costs, it is not an easy ride for the shipper.

 

“Shipping capacity growth has exceeded the volume of goods being shipped in each of the last four years.  Another consequence of excess shipping capacity is the potential for increasingly unreliable schedules”
CHRIS HOUGHTON

 

In effect, shipping lines can decide to remove excess by withdrawing journeys. This is another symptom of their current sensitivity to price shifts. While this may not have a global impact, it can, nevertheless, add to the complications exporters face when arranging transportation of goods.

As in most areas of business, the best solution is to seek expert advice and assistance. For exporters this means finding a trusted freight forwarder with whom they can partner. Freight forwarders perform an invaluable service as intermediaries when it comes to shipping arrangements.

“It is about ensuring that you’ve got the best price, that you’ve planned for any eventuality, and that there’s complete transparency throughout”, Chris concludes. “Knowing your business model, and knowing what the deadlines, must-haves and pinch-points are is a freight forwarder’s business”.

 

If you would like to discuss your needs with a trusted freight forwarder, please call Freedom Logistics on 0161 660 9126.

Additionally, Freedom Logistics have produced a free volatility report, which reveals;

  • Why you can end up paying more – even in a falling market
  • What is going on – what is causing the big swings?
  • What you can do to ensure that you’re getting the best value

You can download the report by clicking here.

shipping volatility