2009 was the most difficult and challenging year for the liner shipping industry in living memory, with many shipping lines reporting dramatic losses because of reduced global cargo volumes and falling freight rates.
The outlook for 2010 is equally challenging. Although there are a few signs of recovery, no significant improvement is expected in the global economic situation until the second half of 2010 at the earliest. Therefore, I would like to offer the following outline of what we see as the two most important changes in the liner shipping industry for 2010, and what we can do to prevent further deterioration of the situation facing ocean carriers worldwide.
- Revenue containment/improvement
We have seen a dramatic reduction in ocean freight revenue during 2009; carriers are operating at significant losses -- the total industry loss is projected to exceed $20 billion this year. Carriers have been required to take dramatic steps to reduce costs and to seek additional financing. We must now ensure that those losses are reversed, and it is therefore incumbent to ensure on a voluntary basis that predatory rate actions are stopped, and also that rates are increased to earlier compensatory levels. Shippers also need to consider the value of maintaining carrier profitability. Carriers need to remain profitable to continue to not only maintain, but also improve service levels to be able to invest in IT, personnel and organization. We need to bring back the service factor as a competitive element in carrier selection.
- Capacity
The drop in cargo volumes has created a surplus of capacity, at least in the short to medium term. During 2009, we saw a significant reduction in the available capacity; 10 percent of the world container fleet is currently idle, and the trans-Pacific capacity is expected to be 12 percent less than in 2009. Based on current projections of growth in world trade for the next few years, combined with the additional ship construction capacity that is scheduled to come on stream, it is very likely that capacity surplus will continue for some time. Therefore, as shipping executives, we must continue to ensure that weekly capacity supply continues to be aligned to demand. We, however, have to make certain that capacity provided is adequate to meet anticipated volume growth because of market recovery.