It would be unfair to give my opinion on what will happen in 2017 without looking back at 2016 — the worst year in ocean shipping that I can remember in my 53 years in this industry.
The first sign of trouble came during the 16th Annual TPM Conference in Long Beach last March. I started to hear mutterings about import container rates that seemed so low I wondered how carriers survive with rates at those levels. Then the month of April rolled around, and sure enough, just from China to the West Coast, the 40-foot container rates started to drop from $900 to $800 to $700. It was a shocking state of events!
I called one of my carrier reps to complain about something that had nothing to do with rates. But when he picked up the phone, and I said, hello, he replied, “OK, Moff, $500 an FEU, and I can’t go any lower!” This was not contract negotiating as I knew it. I was thinking that if I had a Bed, Bath & Beyond coupon, I could have got another 20 percent off.
Within days, all the carriers joined the rate plunge, and for any number of reasons in addition to rates, Hanjin calls it quits. That subject has been bandied about for the past two months, so any comment from me would be redundant, but I will say something on the rates. We will never see the 2016 rates again! If we do, regardless of alliances, another bankruptcy will follow.
The carriers have to be compelled to raise the rates and stop giving away the farm. Capacity issues will improve, but even if they didn’t, the carriers must take action to maintain sustainability going forward. Also, BCOs, including myself, should plan on working with the carriers to arrive at a balanced rate structure that we can all live with, so ocean shipping can remain intact.