Wine and Spirits Shippers Association

As we begin 2009, everything seems absolutely rosy from the shippers’ standpoint. Fuel costs are down, currency adjustment is nonexistent, vessel space is ample, and carriers are constantly in motion to lower their cargo prices for cargo. Everything is great for shippers, right? No. Unfortunately, things are not as rosy as they might seem. The supply-demand nature of price-setting tends to have rates swing like a pendulum from one extreme to another. Right now, the pendulum is clearly on the shippers’ side. That means carriers already are introducing unusual measures to improve their profitability. They are slowing their ships, taking surplus vessels out of service and executing other measures to reduce costs. If that’s not enough, we’ll see continued consolidation of carriers and, perhaps, even some carriers disappearing. Shippers need an adequate supply of vessel capacity within a competitive environment. Shippers have that now, but we risk it disappearing as carriers continue to restrict their services in an attempt to chase profitability. Reasonable shippers want to work with profitable carriers on a long-term basis. Carriers, after all, make long-term commitments to vessels, equipment, terminals and people, and surely want long-term relationships with shippers. So now is an excellent time for both partners to come to agreements on long-term, mutually beneficial relationships. Otherwise, each side risks the worst aspects of the pendulum swing. The key change needed for this year is for shippers and carriers to recognize that they need each other — and that they need each other to be profitable. We seek long-term relationships that stress quality of service, not short-term rate bazaars that are of questionable benefit. Those that embrace this change will truly benefit in the long term.