Over the past year, the container liner industry has enjoyed an unprecedented, and one may argue unexpected, resurgence in volumes in almost all trades. Although the emerging market trades were among the first to recover, the real story for 2010 has been the incredible success of the traditional long-haul lanes to the United States and Europe.
Unfortunately, because of acute equipment shortage and uncertain forecasts for cargo demand, supply was kept in check for the first half of the year, resulting in high ocean freight rates.
Faced with limited options, shippers have lobbied for regulatory reform. However, because of the ample amount of idled capacity available on the open markets, the gap in supply was quickly mitigated by new entrants and services.
Market dynamics, under the current framework, allowed for a rapid return to a more balanced supply and demand scenario. Most importantly, all stakeholders – shippers and carriers alike – need to understand that the volatility in cargo volumes over the past several years is the exception, rather than the long-term rule.
As such, the industry must endorse a stable regulatory framework, as opposed to making sudden and drastic changes affecting shipper and carrier relationships.
In 2011, the deferred order book, notably ships of the post-Panamax variety, will begin to be delivered to many carriers. The industry will face the challenging task of balancing the tenuous supply and demand dynamic, whether it is replacing chartered tonnage with new deliveries, or targeting markets that have adequate cargo growth for the coming year.
One could argue 2010 was only a temporary respite from the longer-term supply-and challenges for the container sector. In addition to adjusting to the volatile financial markets, including exchange rates and bunker costs, carriers will need to more efficiently adjust deployment so that the long-term financial health of players is not jeopardized.