BRAVE NEW WORLD (with special annotations for Brazil)
Text by Robert Grantham from Solve Shipping Intelligence Specialists
Who, like the author of this text, was already involved in "shipping" in the 80s of the last century had the privilege of witnessing a great revolution in maritime transport: the containerization process, which brought with it a consolidation of shipowners and the emergence of first global mega shipowners, while here in Brazil port operations were beginning to be privatized.
The 21st century, especially the last 10 years, points, however, to a revolution that is perhaps even greater than the previous one. Subtly, we are undergoing profound changes in the shipping environment, both globally and locally, which invite us to review the way of doing business, exporting, importing and transporting goods and merchandise.
Among these changes, let us examine the following:
New wave of consolidation: 11 shipowners held 60% of global container transport capacity in 2010, while currently this same percentage of capacity is under the control of just four shipowners: Maersk, MSC, CMA CGM and COSCO. Although it is unlikely that the authorities will allow new major mergers/acquisitions by large shipowners, everything indicates that this process is not over yet, more focused on regional or niche companies (see proposal for the acquisition of Brazilian Log-In by MSC);
Verticalization and integration: Some shipowners are seeking to expand the scope of their activities in order to: protect themselves from e-commerce giants (eg Alibaba, Amazon), reduce their exposure to third parties (eg Cargo Agents) and resume contact with the direct customer and maximize their margins. As a result, they will no longer be simple sea carriers to offer instead integrated logistical solutions, with door-to-door services, which may include land transport at the ends, storage, customs clearance, among other services. Many also control their own container terminals;
Consolidation of Cargo Agents: In response to this movement of shipowners, some of the major global cargo agents have been consolidating through mergers or acquisitions (DSV/Panalpina/Agility, DHL/Hillebrand, K&N/Apex). At the local Brazilian level we also observe this trend (Ex. DC Logistics/Amtrans/Rentalog);
Digitization: The advance in the digitization of activities related to maritime transport and foreign trade has been happening at an accelerated pace (e-quote, ebooking, e-BL, etc.) and was catalyzed by the pandemic. We recently had two important seminars in Brazil to address this issue, one promoted by Advocacia Kincaid, Mendes Viana (focused on the implementation of e-BL, with representatives from BIMCO, CMA CGM and Federal Revenue) and Brasil Export Seminar (where it was announced by MINFRA presidential´s sanction to the DT-e, which brings together more than 90 analog documents in a single tool). More and more words such as IoT (Internet of Things), Blockchain, BigData, Machine Learning and Artificial Intelligence will be present in the management of companies.
Privatization of port authorities in Brazil: The privatization process of the first port authorities in Brazil, starting with Vitória, Santos, São Sebastião and Itajaí, is in full swing. Based on these experiences, other ports should follow the same path, opening up a new horizon of perspectives. The impact may be even greater than that caused in 1993 with the entry into force of the Law on Ports (8.630/93), which, among others, paved the way for the privatization of port operations, the creation of the OGMO and the implementation of CAP's. There are many points still open until we can correctly understand its dimension, but everything indicates that it will promote profound transformations.
Additional Information
TUPs: Private Use Terminals not linked to their own cargo, a product of Law 12,815/13, already account for 65% of the total cargo handled in the country. Although most of these terminals handle liquid bulk (Transpetro) and solid bulk (ores, grains and fertilizers), since the enactment of the law, 195 terminals have been authorized, of which 5 are dedicated to the operation of containers, which jointly handled 2.526 million TEU per year ( 29.7% of Brazil's total);
Pressure from users on authorities: The unprecedented rise in freight rates, and in the financial results of shipowners in recent quarters, has put a spotlight on them. Until now, the authorities have understood that the increase in freight rates was caused by an international logistical “blackout” (repressed demand, congestion at ports, removal of contaminated stevedores, lack of trucks/containers/space on ships, deterioration of “schedules”) , however, breaches of contracts and surcharges have been closely monitored. This pressure tends to be maintained beyond the current crisis.
Pressure on the terminals: The increase in the size of ships and the strengthening of consortia has placed strong pressure on the terminals in terms of equipment, berth extension/depth and adequacy of gates/backgrounds. Many Brazilianl terminals (Libra Santos, Ecoporto, São Francisco do Sul) and international terminals (Hong Kong and Hamburg) have not been able to keep up with these transformations;
ESG– Environment, Social and Governance: This acronym has become increasingly present in the daily lives of companies. After the pandemic, themes such as carbon emission reduction, human rights, transparency, among others, should be consolidated as pillars for the development of companies in all links of the logistics chain.
Near Shoring: The recent global logistical crisis, resulting from the effects of the pandemic, has challenged globalization and the dependence of markets on China's supplies. Concerned about this dependence, there are already many studies and initiatives to bring production back home (reshoring) or at least to bring to suppliers closer by (nearshoring). This could open up possibilities for Brazil, as long as we do our homework, carrying out the much talked about and necessary economic reforms. It will also open up new possibilities for shipowners to operate regional and niche services.
Autonomous ships: still very much in the experimental testing phase, it is very likely that in a few years autonomous ships will become part of the transport “ecosystem”, greatly encouraged by the possibility of cost reduction and difficulty in hiring maritime personnel;
In short, our “Brave New World”
Our “Brave New World” O(to paraphrase the title of Aldous Huxley's book) will be a world in which few shipowners will dominate the global scene and will act along the entire logistics chain, competing with freight forwarding giants.
Business will be conducted more and more digitally and there will be intense pressure for players to be increasingly transparent and adopt practices that protect the environment.
The shipowners will direct their large ships to the “hub ports” and there will be a large growth of feeder ships for distribution to smaller ports (perhaps someday in autonomous ships). The "near shoring" will provide an opportunity for the emergence of new niche lines. The terminals, in general controlled by multinationals or verticalized shipowners, must remain in constant adaptation to new ships and cargo volumes, with an increasingly intensive use of automation.
About the author
Robert Grantham
With a degree in English language teaching, from PUC/RS He began his career in leading Brazilian maritime agencies, such as Wilson Sons, Orion and Lachmann. He was responsible for the start-up of China Shipping in Brazil and was Commercial and Executive Director of the Port of Itajaí. He worked in professional associations in the sector and was a member of the Port Authority Councils in Itajai, Imbituba and São Francisco do Sul. As a consultant, he has worked for private and public companies, insurance companies, shipping companies and terminals. Regularly contributes for specialized publications such as “Guia Maritimo”, “Portos e Navios”, “Container Management”
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