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Monday, September 23, 2019

Maritime Logistics Professional

Decision-makers still saying 'No' to the European cargo industry

Posted to On the waterfront (by on September 8, 2009

Exporters are still using up their stocks rather than saying 'Yes!' to new containers full of products, causing the shipping industry to sink ever deeper into debt.

As the global cargo shipping industry remains in crisis, the European market is also yet to see those green shoots of recovery we’ve all been promised. 

Those illusive shoots may be a little more visible for the property and manufacturing industries, but with so many shipping companies feeling the pointy end of potential clients’ distribution channels, their recovery is likely to take a little longer. 

It seems as though the global economic downturn took everyone by surprise and, as one multinational shipping CEO, who did not want to be named, said, “Everybody stopped making decisions, and anything they did decide was always ‘no’.” This meant that most companies ‘made do’ with the stocks they’d built up, utilising their warehouse in the same way that we eat up the contents of our freezers in the week before payday instead of buying any more groceries.

Take German shipping giants Hapag-Lloyd, widely regarded as one of the most efficient players on the world shipping stage. The company is fending off bankruptcy as it already lost €222 million in the first quarter of 2009, largely thanks to the double-whammy of reduced demand and a dramatic drop in what companies will pay for each container to be shipped. 

Before the crisis, one container shipped from Asia to Europe would cost exporters €1,500, whereas the current charge is only $500; a full $300 less than it costs the shipping companies to transport the cargo. As Ulrich Kranich, the executive board member in charge of global operations for Hapag-Lloyd explained, "At current prices, we aren't making money on any route. There was never a shortage of cargo in the past." It’s no wonder they’re loosing money hand over fist.