The impact of shipping companies withdrawing from shipping routes on the e-commerce logistics industry and its interpretation

Good morning, distinguished readers!

One of the hot topics of discussion in my circle of friends yesterday was the impact that the withdrawal of a shipping line from a particular route would have on the timeliness of the e-commerce logistics industry. Here, I will provide some neutral perspectives on this topic.

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From a commercial point of view, shipping companies are withdrawing from routes because of declining market cargo margins and rising operating costs of ships. According to information, there are not many ship owners operating on the same routes in China with less than 3,000 TEU. The average operating cost per container for small vessels is about US$2,000. And for a large ship of 10,000 TEU, the average cost per container will be reduced to about US$1,300. In addition, competitive pressure from peers has increased, shipping companies have made continuous losses and are not allowed to expand the route, among other reasons, and have decided to exit the route to protect their profits in order to reduce risk or adjust their business strategy. In business, making money is the primary objective. After all, whichever route is profitable will be launched. Since it is not profitable, the shipping company will choose to switch to a new route and continue to operate.

From an operating cost perspective, after a shipping company exits a particular route, other shipping companies will make route adjustments. They will increase traffic on that route and buy larger ships to expand capacity, for example on the US routes. Other shipowners will come in to fill the gap in the market and will need to adjust their routes to accommodate and meet market demand. According to the latest data, the number of new container vessels currently under construction is 722, adding more capacity than the combined capacity of several owners such as HPL+Evergreen+ONE+HMM+YANGMING.

From a price point of view, many people are concerned that prices will fall as shipping lines withdraw from the routes. However, in the current market environment, the price war has already started, but it does not mean that freight rates will drop. Without profit support, the industry will eventually be left with nothing but a mess. In this chaotic world, only those companies that survive the new round of market conditions will be known as the real powerhouses. Therefore, the key for the e-commerce logistics industry is to actively seek customers, increase collections and take care to protect their health.