Wednesday, August 12, 2009

Looking to the future for ocean carriers

Back in March 2009, I said rates won't go up until the supply decreases

What these guys don't understand is, you can't restore market discipline by saying "don't do that". You restore market discipline by getting the supply more closely matched with demand.

So finally, five months later, the container carriers have taken enough tonnage out, they are able to get some rate increases.

Of course, we are also in what was normally the "peak season" in the Transpacific Trade - all the goods coming to the U.S. for Christmas.

I think there has been enough blood spilled by the carriers that no one is out to gain market share. They are all just hoping to survive.

And that's the big question.

Although everyone is saying we have hit bottom, people are only hinting at the fact that there will not be a return to the boom of the last 10 years.

I think we have hit bottom. The big question is, if business continues at this level, or maybe a little bit more, is that enough to keep companies from going out of business?

The problem with the shipping business is all the idle ships. The ship yards are still building ships (although some have stopped), and there are ships in lay-up, which owners will be wanting to get back into service as soon as they can make some money.

For bulk carriers, China is the big player. Their recent surge in iron ore helped the bulk ships. But, these purchases have now slowed, which could cause another drop in the bulk market.

And, the booming tanker market has slowed down, as the speculation in oil has slowed.

It's going to be tough for several more years for international shipping companies.

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