The market we encountered over the past two years was highly unusual. Moving forward, supply and demand will be more balanced. Our outlook remains positive, but freight rate levels are fragile, with significant new capacity to be absorbed this year. Globally, we have yet to see the full effects of the sovereign debt crisis in Europe, the generally slow growth in OECD economies, and the ongoing withdrawal of various governments’ stimulus programs.
Carriers are in the market to serve shippers, but without healthy balance sheets and sustainable financial returns to invest in assets, carriers cannot offer the required services. The current profitability of the carrier industry is quite low compared with many other industries and is barely adequate to maintain a healthy asset investment cycle. Rate volatility, as we have seen in the past two years, creates uncertainty and an unstable environment. This is not conducive to investment in support of trade growth.
Governments and regulatory bodies can play an important role in facilitating carrier-shipper communication. But supply and demand, and the basic laws of economics, must govern the industry. Stability must be based on long-term partnership between carriers and shippers, which will lead to increased global trade growth.
The only way to ensure a bright future is for carriers and shippers to have better communication and mutual commitment.