The maritime industry, be it ports (too many) or shipping lines (too much capacity), is forever an optimistic business, always looking on the bright side of things. There is often a sense of denial about the economic situation and the belief that next year will be better.
This is despite a very long run of poor financials and competitive price pressures.
Early this year pundits suggested that the industry was on the firm path to recovery and that despite warning signs to the contrary there would be an upturn in demand and freight rates.
Wrong on both counts. Had they read this publication more closely and followed the advice of The Economist they might have fared better.
The advent of the three super alliances initially caused many to miss the signs of the downturn in the making. Better management of capacity and service rationalisation seemed to be the panacea for the industry and was meant to help ports and carriers alike.
The players opined that the rash of new vessel orders was at an end and that economies of scale had reached its zenith. Again, wrong on both counts, as new orders are flowing in and we now have ships 24 containers wide further expanding capacity.
The message from the US has been consistent over the past three years. America first and the use of economic sanctions and trade wars has become the preferred strategy tool to bully friend and foe alike.
Irreparable damage is being done to global trade and the global economy. In Europe, the UK and Germany reported negative GDP in Q2 of this year and Italy is flat on its back.
France reported marginal growth for the same period.
In Singapore, on a quarter-by-quarter seasonally-adjusted annualised basis, the economy contracted by 3.3% and Thailand’s GDP grew at its slowest rate in nearly five years
in the second quarter.
As freight rates remain flat to negative and shipping capacity keeps getting withdrawn, it is clear that complacency must be replaced with reality when looking forward to 2020. It is going to be a tough year for all participants.