Reports of an estimated loss of some $20bn in the container sector alone is causing a sharp intake of breath as owners and operators look for means to reduce their costs.
The response to the collapse of world trade and excessive capacity was to slow vessel speeds, miss out voyages, create new joint ventures, reduce head counts and to lay up ships. But this has not been enough. Rate restoration followed, but until the supply/demand ration comes into closer equilibrium, this will not work.
Vessel cancellations, delayed deliveries and negotiations to reduce charter rates then ensued, but were no panacea in the short term. It now appears unlikely that there will be any major bankruptcies as banks and national governments have responded to help those in difficulties. If smaller carriers go under, there will be neither tears shed nor any impact on the market as their market shares are not enough to make any difference.
We the industry extol the need for change – but we have heard that in the past. Will this time be different? Possibly yes. But what can change, one asks. There are few options for action to hand.
Super slow steaming has appeared, with vessels, built for 25 knots, being slowed to 15 knots. This has two advantages: it reduces capacity at least another 5%-10% and it sharply reduces the operating cost as a result of lower fuel consumption. Fuel nozzle technology allows this to be possible.
An industry that has a host of charges for moving goods is moving towards “all-in” rates, on a gate in/gate out basis. Major shippers are pressing for this. Transparency is gone, but pricing simplicity is coming. Perhaps sales forces can be reduced by greater use of e-booking? Now that would be a major change.
More is needed in a fragmented industry constantly battling for market share. More merger & acquisitions are necessary. And while some carriers have the means, other national lines may be forced to merge.
