The shipping industry was once again on a roller-coaster ride in 2011 after weathering two years in a very volatile business environment, both in terms of trade volume and rate levels, since the outbreak of the economic crisis in 2008. Trade volume did not reach forecast levels and with a number of new building deliveries into the market, the situation has added much pressure on the rate level because supply has well surpassed demand.
Unfavorable market conditions also caused several new players who tried to take advantage of the rebound in 2010 to pull out after a short entry. So the shipping industry has been struggling through a rather unhealthy business environment that has been detrimental to world trade.
2012 will be another challenging if not difficult year. Forecasts indicate the struggle with supply exceeding demand likely will continue, which means we may continue to see ongoing pressure on the rate level. Shipping is an asset-based business that requires intensive capital investments that are funded with operations that produce a very narrow margin. So the top priority for the carriers in 2012 is to price rationally, bringing rates to a more sustainable level in order to stop the bleeding from the supply-and-demand imbalance.
The objective to maintain a healthy balance sheet with sufficient cash flow to support daily operations is also very important. Unfortunately, operating costs will remain high. Fuel and other costs associated with environmental compliance and piracy protection are beyond our control. So it has become ever more important to better manage rising operating costs by focusing on areas such as operating efficiency improvements, IT innovations, e-commerce solutions and the deployment of more efficient and environmental friendly vessels.
We realize our customers are facing similar challenges because of the global economic situation. We wish to bring our communication and collaboration with our customers much closer together as it will be advantageous to our efforts in sailing through this rough water ahead in 2012.