One can assume that 2012 will, in many ways, be a carbon copy of 2011. The coming year, however, may prove to be the real test for a number of companies, as the fat accumulated during the boom years will be consumed and still fewer projects are in the pipeline.
While the carriers are oozing red ink, more capacity is being ordered and delivered. The imbalance between supply and demand will continue to depress freight rates throughout 2012 and possibly beyond, despite some positive trends in world trade last year. In an attempt to recover some revenues, new surcharges will have to be invented that will affect the customer’s bottom line. Eventually, some carriers may stumble and be forced to merge.
Being diversified has helped many carriers through leaner periods in previous downturns. This time around it’s not just the shipping sector that is fragile, but also the economy overall and on all continents. Governments are unwilling and unable to support weak and failing industries that require enormous amounts of capital. Private investors are looking at alternatives to this highly cyclical business, especially if generous tax incentives are cut off. Stakes are getting higher and margins are being squeezed. More consolidations are to be expected.
The shipping industry has learned to face new realities and to regularly reinvent itself. In that respect, the current lean period is no exception. One must continue to invest or retreat. There is no more romance in shipping, and only the strongest or luckiest survive. At the end of the day, there will always be hope and reason for cautious optimism.