The shipping industry in general and container liner business in particular are well known for cyclical boom and bust. There is neither a lack of healthy challenges nor exciting opportunities.
During the boom time between 2003 and 2007, world trade enjoyed robust growth. Carrier and shipper communities were confronted with infrastructure constraints, terminal congestion, cost increases from land-side service providers, and tightened safety, security and environmental requirements — not to mention the stratospheric rise in fuel prices that significantly drove up the cost of seaborne commerce.
Ironically, with volume trending downward along with waning world economy and retreating energy cost, 2009 is slated to be an even more daunting operating year. The long vessel order-to-delivery cycle and subsequent new tonnage to be delivered are colliding with the stagnant or even shrinking demand of the coming quarters, if not years.
Given the severity of the economic downturn, the excess supply in our industry brought about by the unsustainable demand will have to be weaned from the system. We’ve seen a number of carrier initiatives, including but not limited to slow steaming, ship layups and deployment optimization.
From the perspective of long-term health of this industry that is so vital to global commerce, a certain degree of constructive destruction may not be altogether negative. Lean times and tough operating conditions are incubators of drastic changes by way of innovation, strategic mergers and acquisitions, and organization transformations, thereby creating economic value addition and paving the way for sustainable investments to facilitate long-term stability and growth. Because of the inelastic nature of demand, carriers can overcome the supply-demand conundrum by way of rationalization individually, and as a group, with increased cooperation, as several carrier alliances have done recently to meet the dwindling demand in an efficient, cost-effective manner.
It is yet early to predict the eventual shape and form of the industry that will emerge from the current worldwide slump. What we can be sure of is that this fabled and fast-evolving business will be leaner but stronger, and our global and regional clientele will be better served than ever before.