Escaping the boom-and-bust cycle: a case study on the global supply chain disruption & its effect on the container shipping industry

Abstract

The container shipping industry has been subjected to the boom-and-bust cycle for decades. Since the occurrences in 2001 and 2008, promising market conditions have encouraged increased order-books amongst container shipping lines. However, as the market cycle rotates to bust and faces a decline in shipping demand, the industry finds itself with an oversupply of vessels. The state of overcapacity has been the downfall of container shipping lines, with the collapse of Hanjin Shipping as a notable example. The effect of the 2008 overcapacity had long-lasting impacts on the industry going into 2019. However, the COVID-19 pandemic has changed everything. The global pandemic and the resulting global supply chain disruption have created a new container bubble for the industry. The market is enjoying rising freight rates and shipping demand today. This has also revitalised the industry and put many carriers in a cash-rich position compared to their pre-pandemic level. Today’s extraordinary position is putting carriers to the test again. Carriers can capitalize on today’s position to create a more sustainable business environment for the future, or they may once again succumb to the boom-and-bust cycle and create another state of overcapacity.