With trade significantly lower over the past year and recovery prospects limited, all types of businesses had to adjust to this correction. Importers had to reduce inventories, retail chains closed stores, distribution centers were eliminated, Asian factories shut down and ocean carriers laid up more than 13 percent of the world container capacity. We also saw many people unfortunately lose their jobs all over the world.
In anticipation of continued growth in world trade, carriers felt obliged to gear up for those expectations. The reason was simple in that this capacity would be needed to handle expected higher volumes and assure continued lower cost of waterborne cargo. Now, with complications of excess capacity, carriers face the dilemma in finding ways to survive.
Carriers are now reducing capacity in order to accommodate lower volumes. If we lose money on every box we move, the priority is supplying enough space to handle peak/non peak volumes while limiting our losses at the same time. Although protecting market share might be questioned, it does guarantee revenue for us even though rates are below acceptable levels.
We all share in this economic problem so it’s now even more important that we strengthen our relationships while helping each other. Ocean carrier clients expect service at a reasonable cost so it’s understandable that erratic levels complicate their planning and budgeting requirements.
Finding ways for shippers to project long term container volumes and carriers to stabilize rates over multiple year periods is paramount to each of our successes in international trade. Stable ocean carriage helps shippers to avoid cost swings in purchasing their transportation needs.
Building loyalty on both of our parts is essential to everyone. I’m not sure carrier associations add much value to these relationships, as individual carriers have unique needs. A relationship between carrier and shipper requires trust. Let’s continue to find that common ground we so desperately need. The best way to do that is to have open discussions with each other to find that better long term solution.