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Monday, July 26, 2021

Maritime Logistics Professional

Future uncertain for troubled box lines

Posted to Far East Maritime (by on September 19, 2009

So the global recovery appears to be finally underway although who knows whether it will be U, V, W or L shaped.

Box-shaped, is what the container shipping business is hoping for with freight rates returning to merely unacceptable, as opposed to catastrophic, levels.
But as executives at container lines look ahead they will agree that planning for the future has never been more difficult. Short term the problems are obvious and while by no means easily resolved, at least they are in full view.
Overcapacity, falling demand for China exports, low rates, volatile fuel price – all critical operating issues that demand immediate, and continuous, attention.
But in the medium to long term, there is a new question being quietly asked in boardrooms: What if this downturn is not part of the cyclical nature of the industry but more of a structural change in the market?
That is a chilling thought to carriers whose business plan revolves around people far away buying lots of things. Consumers in the US are facing very real losses of wealth with their houses dropping value and stock investments down. Any spare cash will go towards paring down debt run up during the carefree credit years instead of buying little Johnny a new iPod or dad a new set of LL Bean duds.
Consumers in Europe and Japan have also seen their wealth slide, and retail spending remains cautious.
What if the spending never returns, or returns but at much lower levels? Where will the shipping industry be then?
Many feel that China’s consumers hold the key to a global recovery, but that may not translate into a boon for the container shipping business. Carriers of bulk, oil and gas will be back in business but the domestic shipping in the mainland will be overland or along the coast.
Intra-Asia trade will increase and the lines may see some action there, but the major trades could be flat for a long time. The future looks very uncertain, indeed.