Jonathan Swift, an author from the 1700s, wrote, “Everything old is new.” Surprisingly, he was not talking about shipping. After two-plus years of a COVID-19-induced freight frenzy, many prognosticated that a new age in shipping had dawned, anchored by a cornerstone of high and volatile rates and declining service levels.
As we emerge from the COVID-19 crisis it becomes ever more apparent that the exogenous impact of a global pandemic on the global supply chain was an aberration of sorts and not a wholesale realignment of international trade, microeconomics and liner shipping. Alternatively, carriers and shippers might instead look at Whartons Finance Professor Jeremy Siegel’s work on reversion to the mean theory, which postulates that periods of higher returns are systematically followed by compensating periods of lower returns.
In our context, did we really believe that the laws of supply and demand had been suspended forever or did we just refuse to acknowledge that COVID had simply amplified those levers? The cumulative sum of supply and demand and the resultant industrial utilization it produces remain the primary drivers of price and service in our industry. It sure feels like we are back to 2019 more every day. Shippers and carriers remain in a symbiotic relationship, reliant on each other. For carriers and shippers, that relationship is defined in ecology as interspecific competition.
Similar to the relationship between corals and sponges in the world’s oceans, they’re competing for sustainment. If the sponges become too successful, they consume food and other resources from the corals that make up the reef. If the sponges overperform, they risk killing the coral, and thus the reef on which they rely.
Everything old is new; same shippers, same carriers, maybe it is time we figured out how to live and work together before we kill the reef.