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5 Events That Shaped Shipping and Logistics in 2016

Hanjin Shipping Ocean Vessel

Posted on 02-14-2017 by Lucia Garza

Reading Time: 4 minutes

Shipping and Logistics Experienced 5 Key Events in 2016

2016 was an eventful year: earth-shaking political developments, as well as the occasional economic shock, certainly held the spotlight. But there was plenty to buzz about elsewhere, not least in the industry we know best. Here’s a quick look at five events and trends that shaped shipping and logistics in 2016.

Hanjin Shipping Is No More

For those who weren’t paying close attention, the year’s biggest surprise was the collapse of Hanjin Shipping. In August, the venerable Korean shipper applied for receivership, setting the stage for an official bankruptcy declaration on February 17 (per Reuters). Hanjin’s peril produced a short-term spike in shipping rates and prompted observers to ask, “who’s next?”

False Alarm in China?

China’s economy grew at a 6.7% annualized rate in 2016, per CNN Money (citing official Chinese government data). Though that’s the slowest reading in a quarter of a century, it’s much better than observers expected in Q1, when a raft of weak readings out of China sent global markets into a tailspin. The global shipping industry, ever reliant on Chinese strength, steeled itself for turmoil — and breathed a sigh of relief when the country stabilized later in the year.

Commodities Hit Rock Bottom

Low commodity prices had dry bulk shippers under pressure throughout 2016, and the picture isn’t likely to change anytime soon. According to IHS, long-term weakness in key commodities such as coal and iron ore, coupled with a relatively young ocean shipping fleet, could precipitate “a very painful and lengthy rebalancing of capacity.” In other words, more Hanjins loom over the horizon.

Shippers Navigate a Treacherous Regulatory Environment

Shipping and logistics firms are no stranger to complex regulatory schemes, but this past year was a challenge all the same.

One example: truckers got firm guidance early in 2016 that the U.S. Department of Transportation’s Electronic Logging Device (ELD) rule would go into effect by the end of 2017. The ELD rule requires truckers to replace old-school paper logs with ELDs, which are harder to game. There’s broad consensus that ELDs will improve road safety, but they’re expensive and intrusive for independent truckers, groups of whom are fighting rearguard action against the regulation.

Another data point: in July, the International Maritime Organization updated the SOLAS (Safety of Life at Sea) requirements to require shippers to verify each container’s weight prior to loading. Containers may be weighed 1) fully loaded with goods or 2) empty, with the full weight of goods added to the empty weight. Estimating is strictly prohibited. Needless to say, this requirement is a potential burden for resource-strapped shippers and carriers.

Autonomous Solutions to Come?

In October, the first road-worthy autonomous truck made its first-ever road trip: a 120-mile beer run from Fort Collins, Colorado, to Colorado Springs. Wired reported on the incident-free journey, the fruit of a partnership between Anheuser-Busch and an Uber-owned autonomous freight firm called Otto. Though it’s very early going, the trucking industry hopes that autonomous trucks will solve the looming driver shortage, set to top 124,000 (per Wired and the American Trucking Association) by 2024.

The Road Ahead in 2017

Future predictions should always be taken with a grain (or a heaping) of salt. This said, signs point to another lean, competitive year for the shipping industry. Capacity oversupply will continue to crimp margins, and persistent economic sluggishness in key regions such as Europe and North America will likely limit opportunities for growth. To thrive, shippers and carriers must run lean – and recognize that no expense is too small to cut.