Governments must relieve supply chain turmoil, says shipping boss

A Mitsui OSK Lines container ship near Shanghai in April. The company has pushed back its forecast of when global shipping will normalise from the pandemic shock to the end of 2022. Photo / Getty Images

The head of one of Asia's biggest ocean shipping companies has warned that governments may need to intervene to "restore order" to a global logistics market tormented by chronic delays, supply chain disruption and record container rates.

In an interview with the Financial Times, Takeshi Hashimoto, president of Mitsui OSK Lines, which is part of Ocean Network Express, one of the world's biggest shipping alliances, said that the industry had miscalculated how long the disorder of the coronavirus pandemic would last.

While some shipping companies had predicted normalisation early next year after the initial shock of the crisis, Mitsui has recently extended its forecast to the end of 2022.

Opinions within the shipping industry vary significantly on whether greater government intervention is warranted, and the form it might take. Many executives are strongly opposed to the idea, but Hashimoto said that the severity of the situation meant that some form of assistance or co-ordination might be necessary to bring an end to the shipping crisis.

"If left entirely to the market economy, individual companies and individuals all doing their utmost to find the best solution for themselves will result in more and more turmoil and an out-of-control situation," he said.

Hashimoto added that while it was critical to respect the spirit of the free-market economy and competition, at the same time, global shipping was a kind of infrastructure industry on which economies relied.

"We need to provide a very stable service to end users and customers and at the end of the day, what we do affects people's day-to-day lives, so something needs to be considered," he said.

The process of restoring supply chains to their former reliability, and of fortifying them against future disruption could, Hashimoto said, require co-ordination between governments as well as between companies.

In the US, the Biden Administration has exerted pressure on the ports of Los Angeles and Long Beach in California, the country's main gateways for trade with China, to extend gate hours for trucks to pick up cargo in an attempt to alleviate vessel congestion.

Last week, the ports announced that following consultations with the US transport department, the port of Long Beach would trial 24-hour operations, while Los Angeles would extend night-time weekend hours.

Hashimoto added that, in a belated break with Asian shipping bosses' historic non-participation, he planned to attend the World Economic Forum in Davos next year in an effort to understand the frameworks that the biggest global giants, such as Maersk and Hapag-Lloyd, might be considering.

Hashimoto outlined a "crazy" succession of ills afflicting the logistics industry as it strained to cope first with the collapse in global demand during the early phases of the Covid-19 crisis and then with resurgent orders as lockdowns became entrenched.

Port closures caused by outbreaks of new Covid variants, supply bottlenecks and driver shortages have contributed to a tight operating environment. Container rates hit an all-time high of $11,109 ($16,176) in mid-September, after having fallen below US$1500 at the start of the pandemic, according to data provider Freightos.

The supply chains of many manufactured products, from upholstered chairs to gaming consoles, have been affected by various factors over the past 18 months. The global shortage of semiconductors was instructive, said Hashimoto, as chip producers shared some of the same lurching boom-bust features of ocean shipping, where heavy investment is followed by a sharp period of belt-tightening.

Both sectors needed a new approach to long-term planning, he said, with an emphasis on predictable, stable investment rather than the traditional model of pouring in capital during periods of boom.

Written by: Leo Lewis

© Financial Times