With rising costs, slowing market growth and depressed freight rates, liner shipping will again be under pressure in 2012. Only a significant spike in trade growth or a major restructuring of the competitive field can prevent an extension of the 2011 downturn. Under these conditions, carriers are asking themselves two fundamental questions: 1) Do I want/need to be in this market? And 2) if I do, what must I do to compete and succeed?
Question 1 is increasingly relevant for those carriers without the financial strength or resources to compete long term. Question 2 is more complicated because customers and markets are changing.
Here’s what it’s going to take to compete in 2012 and beyond:
- Financial wherewithal: Liner companies must have strong balance sheets to outlast the downturn and to invest in opportunities that often arise at the trough of the business cycle.
- A large, modern fleet: Carriers need larger, more fuel-efficient vessels that provide economies of scale. Under today’s competitive pressures, cost efficiency is the key to survival.
- Good understanding of the market: Successful competitors will stay close to customers and understand clearly what they want — and are willing to pay for and get rid of what is not of value or cost compensatory.
- A hard look in the mirror: Self-assessment is critical. Internal policies, processes, and organization must be reviewed and challenged.
Fundamental changes are reshaping our industry. Costs, especially for fuel, remain high even in the midst of a faltering economy. Market growth, which was the foundation that long supported a capital intensive, fragmented industry, is slowing and so the industry will need to adapt even if by necessity and not choice. Business cycle compression and the impact of global markets means trade lanes react more in unison than ever before, and with more volatility.
In this environment, carriers can survive and thrive. But financial strength, competitive cost base market savvy and a willingness to constantly accept change will determine the winners.