Ocean carriers rebounded financially in historic fashion in 2010. They needed to, but their resolve was at a painful cost to the shipping community. Constant rate increases, new surcharges and space/equipment restraints have created more contentious feelings than I have ever experience between ocean carriers and shippers.
In 2011, the most significant changes ocean carriers and shippers need to come to grips with are seeking consistent, compensatory rate levels, as well as providing space guarantees.
Now that the ocean carriers have returned to significant profitability, let’s stop with the constant rate increases and new acronyms for surcharges. An increase is an increase. The carrier’s ability to retain profitable rate levels will, of course, depend on their ability to adjust their supply to meet demand. It is also incumbent upon the ocean carriers to provide consistent service and adequate equipment to meet the shipping community’s needs.
Carriers must stop being resistant to new ideas, such as writing in space and equipment guarantees in their contracts. I can’t tell you how many times in 2010 my clients asked the carriers to provide space guarantees, even with a hefty penalty clause if the shipper didn’t provide the cargo promised, and they were denied by the carrier, stating that this type of contractual arrangement couldn’t be administered internally.
This type of resistance needs to be addressed by each carrier. Those that can adjust and administer space and equipment guarantees in their service contracts will be making a giant step toward lessening the contentious spirit between carriers and shippers.
It is equally incumbent upon shippers to provide accurate forecasts to the ocean carriers, and they should be required to pay a penalty if they don’t hold up their end of the bargain.
Steve Horton passed away earlier this year. A veteran of the shipping industry, he was a frequent contributor to the Annual Review & Outlook and often contributed his insights to The Journal of Commerce over the years. His wisdom, observations and friendship will be missed - the editors