Ocean Shipping Market Downturn... duh!

Maybe I am just too old. Someone is SHOCKED that the shipping industry is seeing a dramatic downturn. SHOCKED I tell you.

I remember when I worked for a carrier, there was a proposal to do a big marketing campaign. After all, the guys on Madison Ave. know advertising increases business.

I laughed, and reminding folks that we were in the shipping business. We didn't make the cargo move. All we could do was try to be in the right position when trade patterns changed.

Now I don't want to pick on this guy at APL, but if he knows how to push back market forces, maybe he can help out some of those folks on Wall Street.

This from the article in American Shipper, 24 Sept. (click here for complete article)

"A senior executive of APL has called on individual container lines to take decisive action to reverse the current market downturn.

Dan Ryan, APL’s Greater China president, speaking at the second Containerization and Liner Shipping China conference in Tianjin, said that a negative scenario of financial market turmoil, low consumer confidence as well as rising inflation and commodity prices, compounded by historically high fuel prices, requires lines’ urgent attention.

Suggested solutions included carriers moderating growth aspirations, returning excess tonnage to the charter market, rationalizing and even suspending some services, and having stronger resolve to pass along bunker costs to customers.

“If we fail to take action, the industry could see a more significant downturn than we have seen in many years,” he said."

Now, some of what he says is valid. Individual carriers can reduce supply. But the days of shipping cartels are fast disappearing, so carriers doing a lot collectively will be a problem.

And that bit about returning excess tonnage to the charter market? What then? You just gave someone cheaper ships to go after your cargo.

Each carrier must make these decisions on their own, and may the best one survive.

I will put in my 2 cents.

The carriers can slow down their vessels, thereby reducing bunker consumption. Assuming they wish to maintain the same frequency, this would also require additional ships, which would absorb some of the excess capacity.

They can use this time to put their ships in dry-dock for maintenance.

They can take out piracy insurance and start sailing past Somalia.
(this is a joke)

Anyway, this will be the shake out time in the industry.

As I use to say "it's kinda like K-Mart complaining about Wal-Mart".

Oops. I am old.