Promises of a good year
Economists, famed for their herd instincts, seem to have broken ranks
Being an economist is not easy. We are expected to have an opinion on the state of the economy but are usually castigated for our views.
Economists are famous for their herd instinct, there is not much digression in views, and if there is, there is more criticism.
We build models trying to emulate the world and then try to explain how they work to a skeptical audience, many of whom take decisions by the “seat of their pants”.
Why the cynicism? It has to do with the economics of reality. We have come through the worst recession since the Great Depression and one of the most spectacular recoveries in memory and are now trying to work out what the new year has in store for us.
Prior to the recession carriers, terminal operators, port authorities and shippers alike worried about congestion and the length of the supply chain.
2010 finished with volumes that reached the 2008 heights and 2011 promises to surpass those levels and, lo and behold, there is no congestion, no “real” shortages.
Some terminals report that they are a bit tight-ish, but what’s changed is the velocity of boxes through the terminals, freeing up landside stack capacity (often the bottleneck, not the quay).
The best news of course has been on the financial side. Almost all the carriers made significant recoveries and retreated from the brink of bankruptcy and terminal operators have seen a return to levels of revenue that allows them to seriously think about new expansion projects.
With slow steaming, shippers are managing their supply chains better and their need to get products from point of landing to the retail store much quicker. This has a significant effect on the carriers revenue as turn-arounds are quicker and for terminal operators, the ancillary portion of their revenues are improved.
Economists appear to have lost some of their herd instinct. Projections for this year vary substantially with growth rates for the main trade routes ranging from 3% to over 10%. My money is on containerised trade growth of 8% on the major routes.
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