Ceres and Yusen Terminals, for the most part, are GDP growth-driven businesses. Thus, the current positive economic environment characterized by low unemployment, low interest rates, and generally lower volatility provides confidence looking ahead. When businesses feel confident, they invest and create new jobs; this is a core objective of economic activity.
In the transportation sector, like many others, strong consumer sentiment is overwhelmingly positive, ultimately translating into increased demand for goods and services. Many of us reading The Journal of Commerce and JOC.com are enablers and beneficiaries of global commerce; few stand to benefit more in times of economic expansion, and for this we should be thankful.
Switching to industry specific influences, none can be more significant than consolidation in the liner business. Container shipping is the nucleus of global commerce. It is predictable, stable, inexpensive in real terms, and particularly so relative to the value of goods transported. Thus, logistics companies and BCOs, enabled by reliability have been able to dramatically reduce warehousing and inventory cost over the past 10 years.
But what does liner consolidation mean to horizontal and vertical value chain stakeholders. The trickle-down effect of consolidation has really yet to manifest as everyone from port authorities, terminal operators, stevedoring companies, railroads, trucking, logistics companies, organized labor, maintenance companies, IT providers, BCOs, and NVOCCs, etc., consider how to adjust. Continually improving the efficiency of our global supply chain is in the interest of all stakeholders, and it will indeed evolve. How we achieve this continued efficiency will depend in part on the suppliers and customers of the liner carriers.
Our working assumption is that there will be further Line consolidation, which will likely drive consolidation in other related sectors. How soon? Which sectors? Who will win and who will lose? All remains to be seen.
Lastly, in terms of immediate items of major significance, i.e., important developments in our industry occurring while we are contemplating the future, the conclusion of a contract extension between the Pacific Maritime Association and the International Longshore and Warehouse Union cannot be understated. Our hope is that by the time you read this material, a new contract extension on the East and Gulf coasts will be in place or imminent.