As economic growth contracts, so must the services offered by ocean carriers. Unlike so many businesses, carrier assets are mobile and can be redeployed or laid up if conditions mandate. The abrupt slowdown in cargo volume, not only in the Asia-U.S. trade but also in the Asia-Europe trade, is a result of the subprime mortgage crisis.
Unfortunately, cargo volume growth is slowing everywhere just when many carriers are taking delivery of larger container vessels. The carriers’ financial results are reaching a critical stage, with more vessels targeted for layup to minimize losses. This is a significant change for our industry, one that will bring many challenges this year. However, the reduction in oil prices offers some relief, which hopefully will continue while the U.S. economy is contracted.
In 2008, we observed several landmark changes in environmental regulation, and we anticipate even more rapid developments in the environmental arena in the future. Last July, President Bush signed the Maritime Pollution Prevention Act of 2008, clearing the way for the U.S. to establish an Emission Control Area off all U.S. coasts, requiring ship traffic within these areas to operate on cleaner fuels. We expect to see such a proposal from the U.S. government by the spring of 2009. Coupled with this proposal, the U.S. Environmental Protection Agency has proposed regulating greenhouse gas emissions from several sources, including ships.
Other regulatory challenges before us include the Automated Export System, 10+2, the China 24-hour rule, the multimodal manifest system, and the in-bond management program — all in addition to existing regulations.
Despite such challenges facing our international community, it is important that we strive to keep cargoes fluid, in 2009 and beyond.