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Analysing The Evolution of Trade Routes & Hubs

By Mateo Wiegold, Content Producer at TOC Worldwide.

On a global scale, about 80% of goods are transported by sea due to its cost efficiency compared to that of land or air transport. The covid-related unprecedented disruption that we have witnessed, however, is forcing shipping lines and cargo owners to look for other alternatives that allow them to meet delivery times.

To tackle this problem trade routes have been undergoing significant changes, one of which most relevant is the reduction of port calls in specific trade routes. According to a recent DHL market outlook report, this strategy could ease up the container crisis, leading up to some type of recovery in 2023.

In fact, the 2M alliance (MSC and Maersk) has recently announced their decision to temporarily consolidate Asia-North Europe port calls in 2022 by reducing them in Northern Europe. While this reduction was claimed to be only temporary, should it prove beneficial for delivery times, there lays the possibility of becoming a more permanent solution, not only for Asian-Europe trade lanes, but what if such strategy were to be replicated in the Americas? In a region with such extension and complex geography, such strategy poses a potential threat for ports & terminals: How will they manage to remain competitive enough to consolidate themselves as hubs or gateways for trade? And if not, what other options do they have? Furthermore, how could regional supply chains be affected? How is transpacific trade evolving compared to that of the Atlantic Ocean?

With this ever-changing trade route landscape, the need for major arteries is great but so is the need for a network that links major seaports to inland ports and waterways. Ports and terminals should therefore assess whether they possess the necessary infrastructure to play as a hub, a gateway, or a node in their specific geographic location, and what their connectivity options are if they are to feed smaller ports instead. After all, can all ports become hubs? And more importantly, do they need to? What is the role that each port plays in the supply chain?

While optimizing trade routes is paramount for shipping lines’ business models, their search for efficiency is driving them to look outside the scope of maritime transportation, as proven by key players like MSC, Maersk and CMA CGM investing in airplanes. Despite their claims do not indicate a full switch towards air transportation, there is a clear strategy: Diversification of distribution channels. 

As the trade route landscape evolves, is it possible that the industry finds itself at a point where traditional one-stream supply chains develop into a multi-stream supply network? One wonders whether ports could implement a similar strategy to that of shipping lines and develop alliances that guarantee ports calls – from competing to complementing each other, there could be a silver line when tide goes down.

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