An Overplayed Hand?
Welcome to the 99th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I explained why it can sometimes make perfect sense for me to report on wildly unprofitable companies in LogTech. This week, I’m drilling into an existential container shipping question as we head into the final third of ‘22.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@spglobal.com or on Twitter at @LogTechEric.
I’ve joked more than once that pandemic-fueled demand for imported goods was essentially the equivalent for ocean carriers of having a rich relative they never knew die and bequeath them an unexpected fortune. No matter how much or little meticulous planning each individual container line undertook prior to March 2020, none of them could have possibly foreseen the bonanza that awaited them over the next two years.
The size of profits earned by the carriers, individually and collectively, has been the source of many acerbic columns, blog posts, and tweets. I’m not going to add to that pile here. The carriers made the money they did and no one is getting reimbursed for a $25,000 spot rate, so there’s not much point in dwelling on what many considered to be massive exploitation of an opportunity.
What I will, however, explore here are two elements: one tech-related and one non-tech-related. First, the non-tech-related one. Putting aside the profits container lines have raked in the past two years, it is perfectly understandable to speculate about what the eventual consequences of those profits will be. By that, I mean that five years from on, will we look back and say that what transpired in ‘20 and ‘21 was impactful in terms of the structure of the market. Will there have been a marked increase in reshoring or nearshoring. Will the volume of long-haul container trade start contracting, after decades of expansion, because shippers will have gotten systemically worried about risks to geographically dispersed supply chains?
Another wrinkle to this unknowable question relates to regulation. Massive profits didn’t necessarily induce a rewrite to US shipping law as much as dysfunctional supply chain performance, but it certainly didn’t help. Things like invoicing, and detention and demurrage, and the preference of moving empty containers back to production regions over laden exports to those markets…all of that was addressed in the bill that passed in mid-’22. None of those issues were new - at all - but they came to a head this year in such a way as to instigate greater regulatory scrutiny. Calls to do away with bedrock policies like tonnage taxes and anti-trust exemptions have been made for years. But they take on a greater degree of intensity when juxtaposed against eye-popping profits.
Now let’s address technology. I think it’s fair to ask whether, in five years’ time, the carriers’ collective windfall moved the needle from a technology perspective. Are carriers, individually and collectively, easier to do business with? Is their data more reliable? Are they invoicing correctly? Do they have better insight into their assets? Are containers truly IoT-enabled? Are they able to contract with customers in such a way as to root out the extreme peaks and troughs that have forever characterized the industry? I’ve written about micro-developments on all these subjects over the past couple years. Some initiatives pre-date the pandemic but have kicked into high gear of late. Others have started during the pandemic.
But when I zoom out, on a macro level, I still don’t see an industry that is a pleasure to do business with. Not to say this can change during the course of the chaos of the last two years (even as carriers raked in profits, they themselves have juggled massive operational headaches). But five years from now? That feels a fair timeline to have judged whether tens of billions of dollars actually improved the technological prowess - soup to nuts - of an industry.
It’s fair right now to speculate whether carriers, sensing a massive opportunity that was largely out of their control, might have overplayed their hands. On the other hand, you can see that the last two years have provided carriers with a financial buffer - playing with house money, to belabor the analogy - that they’ve never enjoyed before, leaving them to dictate the state of play in the market rather than reacting to what big shippers might have wanted in years past.
However you look at things, it will be a fascinating period ahead.
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Registration for the second annual TPMTech, Feb. 23-24 in Long Beach, Calif. is live. So get your early bird passes while you can! It’s a 30 percent savings off full price until Oct. 2.
Neal Peart Lyrics of the Week:
We sometimes catch a window
A glimpse of what's beyond
Was it just imagination
Stringing us along?
More things than are dreamed about
Unseen and unexplained
We suspend our disbelief
And we are entertained
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
Very noteworthy development this week from NYSHEX, which announced Tuesday it will provide the digital underpinnings for Hapag-Lloyd’s mutual-commitment contract product. The reason this is big? Because it shows NYSHEX’s technical infrastructure won’t be confined to contracts within its platform, but can be applied to any contract between shippers and carriers/NVOs that want to agree to two-way commitments. As noted in the story, this is not exclusive to Hapag-Lloyd, they are merely the first mover.
Interesting one from my colleague Teri Errico Griffis on a new complaint before the FMC alleging Maersk failed to honor a contracted space agreement with a newly formed shipper association in 2020 and 2021. Watch this space: more complaints are coming, something the FMC asked for.
And here are some recent discussions, reports, and analysis I found interesting:
This looks like a great discussion on whether contract or spot ocean freight rates are harder and more important to manage.
My colleague Peter Tirschwell will be leading a highly topical JOC webcast on the impact the revised shipping act (noted above) will have on detention and demurrage. Don’t miss this one!
A good breakdown from Loadsmart on their Reliable Contracts product.
Make sure to catch my discussion on LogTech Live at 10 am ET today with Michael Rentz, chief revenue officer at import management software provider Gnosis Freight.
Some upcoming events I’ll be involved in:
I’m participating once again in the Parnity Forwarders Online Conference Sept. 14-15. Reach out if you want a discount code, which the organizers have kindly offered to my readers.
Our Inland Distribution Conference in Chicago Sept. 26-28 is now less than two months out. I’ll be doing a one-on-one with Emerge CEO Andrew Leto and then leading four tech-oriented discussions, including the one on small carrier tech, as well as sessions on LTL tech, freight procurement advances, and venture’s future role in trucking. Don’t miss this - it’s the most substantive surface transportation conference in the market.
For early risers in the US, and morning time CET, I’ll be joining an all-star panel at Container xChange’s Digital Container Summit Oct. 4 at 4 am ET/10 am CET. Joining me to discuss where the container market is headed are The Loadstar’s Mike King, Drewry’s Martin Dixon, and Xeneta’s Peter Sand. Details to come on registration.
Really delighted to join Rob Garrison on his Let’s Talk Supply Chain show First Things First noon ET Oct. 11. Make sure you’re subscribed to his show here for updates and episodes.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or S&P Global, and any opinions are mine only.