The greatest downturn in liner history hasn’t changed the way carriers operate, so their customers may as well get used to paying more.
While there is plenty of room to argue against the host of surcharges imposed by the container shipping lines, there is no question that the carriers’ costs are going up.
The scary part, at least for their customers, is that their costs will never come down. There may be spikes every now and then, but the overall trend in the price of oil will be illustrated by an arrow that steadily heads for the sky.
Unfortunately, ships carry most of the world’s cargo from far away places to the big consuming nations. These are US$100 million chunks of money that have to be financed, amortised and depreciated. They also run on fuel, which as we just mentioned is getting more expensive.
As carrier costs grow, so too does the pressure coming back down from the directors on mahogany row. That means more of the oddly named “rate restorations”, general rate increases, bunker adjustment factors and peak season surcharges.
The top 23 lines are estimated to have lost US$15 billion last year, so their push for profitability was always going to be an aggressive one. So any shipping line executive tasked with researching new ways of improving customer relations should chuck his research overboard, because relations are not going to improve.
Carriers and shippers are firmly back in the “you screw us, we screw you back” mode of operation that has characterised their relationship since the invention of containerised shipping.
The greatest downturn in history hasn’t managed to change this, so it is unlikely anything ever will.
But the injustice of it all infuriates shippers. For instance, containers are currently running short because the lines stopped making or ordering them last year. The lines are also slow steaming, which means the containers are spending more time at sea, and this is greatly contributing to the shortage of boxes. Yet even though the container shortage is a problem entirely of the carriers’ own making, the lines still hit shippers with a “repositioning” surcharge.
Overcapacity is another corner that the carriers painted themselves into by chasing market share.
At the moment the carriers are sailing full and bringing in much of the idle capacity that has been sitting in lay-up. They are currently holding all the cards, but the swings and roundabouts principle will be applied when the shipping cycle turns.
In the past, that used to be every three or so years, but there are ominous signs that the next downturn in container shipping lies as close as the fourth quarter.