As we look ahead to 2012, we hope we don’t see a return to 2009. Although overcapacity is the main concern for everyone in global freight transportation, I expect capacity in ocean and air to decrease in 2012. I believe carriers will have no choice but to curb available capacity in an attempt to keep rate levels from plummeting even lower, as we saw in 2009.
It will be important for the market to maintain rate levels to allow profitability for carriers. Dumping prices doesn’t help anyone in the long term. Carriers can’t accept such large losses, and additional capacity isn’t going to just disappear. It’s critical that carriers find a way to manage capacity to maintain sustainable rate levels. This is the best thing for world trade and the prosperity of the supply chain system itself. Carriers, third parties and shippers must be able to find the right balance to smooth the flow of goods.
Economic issues in Europe, the U.S. and in China, however, will dampen demand and pressure rates, even while more capacity comes off the order books and into the market. This will make life difficult for carriers and 3PLs to manage shipper expectations. There are no easy answers, but I think we must find a way to manage capacity for the long-term health of the industry.
At the same time, operating costs will increase. Continuing expansion of security programs, such as the proposed air freight import screening mandate for cargo moving to the United States, will add to the total cost of importers. An additional threat to business will be possible tariff restrictions for trade with China due to currency valuation conflicts.