The overwhelming priority in 2009 for supply-chain managers dealing with international commodity trades will be a singular attention to risk management. The order acknowledgment process will receive even more scrutiny as more controls will be placed on credit checks and financing.
Successful trading companies will revert to more conservative payment and financing arrangements. More transactions will be done on letters of credit. It will take much more coordination to pull off spot trades that are the lifeblood of base commodity trading and a major source of carrier demand.
The aftereffects of the financial meltdown that struck in the fourth quarter of 2008 will ripple throughout 2009. Shippers are still trying to sort out the current congestion in the main wastepaper export ports of China and India, even as oceanborne wastepaper and other recyclable commodities lost up to 75 percent of their value as markets collapsed.
While there is much interest as to where ocean carrier capacity, service and rate levels will settle, those issues will be secondary to ensuring a sound cash flow cycle. It is amazing how quickly the shipper-carrier dynamic has cycled. In last year’s first quarter, U.S. exporters were begging carriers for space and equipment at almost any rate. In the fourth quarter, carriers were begging shippers for cargo just to fill their underutilized vessels. 2009 will start out where 2008 ended weak.
I can only hope that this will change quickly, but many well-established companies will suffer along the way. Those with the strongest balance sheets and internal risk-management controls will survive and flourish.