It is quite unfortunate that the financial meltdown, followed by an economic downturn from the middle of 2008, caused a growing pessimism in our industry in 2010, with partnerships between shippers and carriers becoming a casualty.
The reality was that many shippers could not secure the space or equipment they needed from intended carriers, while at the same time shipping lines could not provide the space and equipment requested by its customers. There were miscalculations on both sides in forecasting supply and demand.
Under these circumstances, I am hopeful we will see a change from this unproductive one-sided process to a true cooperative partnership environment in 2011.
Partnerships are always intended to be mutual or reciprocal. As we enter a new year, we should pause to ask ourselves whether partnerships truly exist within all segments of the shipping industry.
Within certain shipping sectors, such as bulk carriers, tankers and LNG carriers, such partnerships thrive. In each of these sectors, shipments are fixed through formal time charter contracts in which the freight rate is mutually agreed upon on a cost-plus basis.
There also is, however, a spot market in these sectors, and the freight rates fluctuate every day or even by the minute depending upon market conditions.
What bulk carriers are anxious about mostly is a portfolio of contracted cargoes versus spot cargoes. Bulk carriers on average have as much as 70 percent of their fleet committed to contracts, which leaves 30 percent to market exposure.
Interestingly enough, bulk shippers take the same approach with their respective cargoes.
Last year was an extremely challenging year for the container business where all space and equipment was committed quickly, and no additional space became available for release. It is time for shippers and carriers to sit together and seriously discuss an approach toward creating a partnership where both partners can meet their operational and financial goals.