What the world needs these days are some quality crystal balls, because the ones we have now are terrible. In a world where near-term “expert” forecasts range from a (best-case) rebound in six months to (worst-case) an outright world war, it can be daunting to plan any international business. In a crisis, we are trained to fight or flee, or, if done cleverly, fight and flee by exercising old-world traditional prudence in finance management and new-world knowledge-driven innovational entrepreneurship to take advantage of the dramatically changing environment around us.
Shipping is used to cyclicality. It’s just that this time several cyclical waves resonated and came together simultaneously, resulting in a deep depression. They will separate soon enough, being individually driven by different fundamentals, and the current panic will recede.
I maintain my position expressed in this column last year: 2008 should have been a year of sharpened accounting pencils, because yield should trump market share.
This becomes even more crucial in 2009. Liner container shipping will finally reconcile its gross habits with its net income. The year will be marked by laying up excess ships, increasing freight rates from the current unsustainable levels and consolidation (mergers and acquisitions) that will reduce the number of players in the market. Service providers to the lines (terminals, charter companies, bunker suppliers, even crewing agents) will suffer rate erosion as ships are laid up.
The important change in the liner container business will be better financial control by shipping companies in pricing policy, driven not by choice but by necessity. Carriers will finally reach the standard of other industries, where price is defined by the chief financial officer rather than the salesman in the field.