Shipping demand

The global market for waste is worth an estimated 283bn a year, and its a figure thats growing because of increasing export volumes and rising prices.

More than a third of the waste paper and plastic collected by British local authorities, supermarkets and businesses is sent to China, the top destination for waste. Understandably, the worlds major shipping lines are competing for a slice of this market, and the UK is no exception.

Could this be fill your boots time for shipping giants? Actually no the global financial crisis hit container shipping hard, and these are still tough times for the shipping lines — the market is sluggish, rates are low, margins are tight.

Spiral

There has been an overall downward spiral in freight rates over the last four years, and 2013 was challenging to say the least, with container volumes remaining more or less flat. Drewry, the maritime sectors specialist research and advisory organisation, highlighted that last year was another difficult one for most ship operators, and with weak freight earnings there was pressure to keep any increase in ship operating costs to a minimum.

Containership reliability worsened in every quarter of 2013, with the fourth-quarter decline taking the on-time average below 64%; the lowest it has been for two years (61% in 3Q11). Compared to the same quarter in 2012 when the all trades average reached a peak of 75.2%, the fourth quarter result was down by a hugely disappointing 11.4 points.

Simon Heaney, senior manager of supply chain research at Drewry believes that the focus on reliability seems to have been lost in the current cost-cutting environment.

Shippers are now paying more for poorer services. They know that lines are saving money, so they will be unwilling to accept further rate increases. He reasons that this could provide an opportunity for more reliable carriers to secure better rates.

Maersk Line maintained its position as the most reliable major carrier in the industry in a generally poor fourth quarter when most of its competitors suffered a free-fall in on-time ship arrivals. The weaker performance coincided with a raft of skipped voyages. With more planned for the first couple of months of 2014, the short-term outlook for reliability is not great. And just to hammer the point home, Drewry recently reported that fewer than half of the global container carriers made money in 2013.

Pricing

Of course, this is good news for the UK waste industry as pricing isespecially competitive at the moment. However, the importance of a reliable freight forwarder is paramount as they will also be able to help keep costs down.

Quay rent is the charge made when docked containers are not taken off quay on time therefore incurring costs to the port for a parking space.

The knock on effect of this is that there is then a further charge from the shipping line for overdue rental of the container (demurrage). This is quite often the elephant in the waste industry room, sometimes adding considerable and unexpected costs. This can compromise companies entire business operations and as such, we are finding that reliability is becoming increasingly important.