During the past three years, rising trade volumes have increased demand, thereby pressuring prices upward; however, falling oil prices and the fact that capacity growth exceeded demand growth early in the period have mitigated price gains
Los Angeles, CA (PRWEB) March 04, 2015
Deep sea cargo transportation services have a buyer power score of 3.7 out of 5, which indicates moderately high buyer negotiating power. The primary market characteristic that has favored buyers over the past three years is a flat price trend, which has occurred despite heightened trade volumes and an ongoing shift away from airfreight and toward waterborne transport. Early in the period, capacity expansions exceeded demand growth as carriers received ships ordered in the aftermath of the recession (when trade volumes boomed). Carriers boosted capacity to compete for market share, and the result was year-on-year price declines in 2012 and 2013.
“However, carriers increased their cooperation through newly formed and strengthened alliances in 2014. Most importantly, the market's largest carriers, Maersk Line and Mediterranean Shipping Co., signed the 2M pact, under which the carriers will share vessels on some of the world's busiest trade routes for the next 10 years. Together, the partners control about 29.0% of global container capacity. Additionally, the influential G6 alliance, composed of six leading carriers, increased its cooperation under a new agreement that lasts until 2016,” according to IBISWorld business research analyst Anna Son. Improved cooperation between carriers allows them to better match capacity growth to demand growth and increases their pricing power. During 2014, service prices have returned to mild growth, and IBISWorld projects marginal price growth to persist during the next three years, slightly detracting from buyer power.
Buyer power is hampered by carriers' reliance on nonnegotiable fuel surcharges. “Because fuel prices are historically volatile, fuel surcharges have helped raise this market's price volatility to a high level, reducing buyers' ability to accurately budget shipping expenditures,” Son says. Buyer power is also reduced by the high frequency of general rate increases (GRIs) over particular shipping lanes, which mainly affect spot rates, but also raise contract renewal rates. Additionally, the deployment of mega-ships, which helped spur the recent wave of carrier cooperation to help fully use their capacity, has resulted in delays at ports not yet equipped to handle the massive vessels. For more information, visit IBISWorld’s Deep Sea Cargo Transportation Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of deep sea cargo transportation. This form of transportation involves US flagged vessels and non-US flagged vessels that move cargo. Most shipping routes in this market are international. Buyers purchase shipping capacity on a spot basis (i.e. at current market rates) or through contracts. In this report, buyers are also called shippers, and deep sea cargo transport companies are also called carriers. This report does not include the transportation of passengers.
Executive Summary
Pricing Environment
Price Fundamentals
Benchmark Price
Pricing Model
Price Drivers
Recent Price Trend
Price Forecast
Product Characteristics
Product Life Cycle
Total Cost of Ownership
Product Specialization
Substitute Goods
Regulation
Quality Control
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Imports
Competitive Environment
Market Share Concentration
Market Profitability
Switching Costs
Purchasing Process
Buying Basics
Buying Lead Time
Selection Process
Key RFP Elements
Negotiation Questions
Buyer Power Factors
Key Statistics
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.