Strong retail sales in the US and Europe are raising prospects of an inventory replenishment drive to buoy orders and give the carriers something to look forward to in the New Year.
The ancient Mayans predicted the world would end in 2012 and as far as the container shipping industry is concerned, they may be right. With the US and European economies doing their best to commit suicide, the 2012 outlook is the exact opposite of “fantastic!”.
For that matter, 2011 is not going to finish on a high either, and the world’s liner industry will want to forget 2011 as fast as it erased 2009 from memory.
Profitability has long been forgotten and the carriers are in severe cost-cutting mode, idling capacity and increasing slack season service withdrawals. Malaysian shipping line MISC even pulled out of the container shipping business altogether after losing almost a billion dollars in four years.
But wait. Black Friday in the US proved that consumers are ready to spend; they just want “doorstopper” prices. A record US$52 billion sent tills ringing off counters.
European consumers are also expected to reach for their wallets this December as hopes rise that their dismal bunch of leaders can find a way out of the deep debt hole.
As we said before in this blog, surely the unexpected consumer demand will deplete inventories that have been kept tightly controlled all year. If there is nothing on the shelves and the warehouses are bare, the retailers will need to get their orders in.
Traditionally there is a surge in air and ocean freight exports from Asia before China shuts down for the Lunar New Year holidays. The problem is that Chinese New Year will be early in 2012, the week of January 23, and orders need to be placed soon if they are to me produced in time. The one positive is that China doesn’t bother with Christmas and the western New Year holidays.
Interestingly, a forwarder told us that while shipments had not come to a halt, his customers had been slashing volumes. With such small margins, the forwarder is predicting hard times next year and believed the smaller volumes will become the norm as retailers remain cautious and consumers watch their discretionary spending.