Freight Transport

According to Drewry Shipping Consultants' latest Container Forecaster analysis, the container industry will continue to be burdened with unsustainable freight rates unless it discards its market share mind-set

Capacity changes and vessel lay-ups are not enough to counteract the global recession, and the industry remains in serious trouble The bad news for the container shippers is that there is no good news The glimmers of hope peddled by some industry leaders are nothing more than wishful thinking

According to Drewry's latest analysis, there will be a 103% contraction for containers by end-2009, followed by a mere 1% growth next year

For one of the most competitive trade routes - Asia-Europe, three years of demand growth have been wiped out

Drewry predicts that global container handling in 2009 will be 27 million TEU less than 2007, which is also bad news for the port investment sector

Neil Dekker, editor of the Container Forecaster, commented: "While our numbers are estimates, eg the price of oil for the rest of 2009 is not easy to forecast, our analysis shows that the container sector is looking at a $20 billion black hole"

He added that Drewry believes that the basic make-up of the industry will change as companies go belly up, amalgamate or shrink - shedding assets and personnel in the process The reality is that few, if any, of the actions carried out by the carriers to move away from the current abyss make sense

"For Drewry, that acid test will be whether, in ten years time, the industry will have learned the lessons from the downturn and follow business models that protect profits rather than risk-taking expansion and market share"

According to Container Forecaster, the business model of some of the smaller operators is proof that companies can operate profitably and are quietly expanding Larger companies, rather than bemoan the vagaries of an unforgiving market, need to focus on sustainable solutions and try and resist the temptation to focus on market share a big ask perhaps, given that market share has been the overriding mind-set for forty years

Launching new services in the hope for a summer peak may be short sighted and even illogical since it will put even more pressure on the current rate restoration initiatives going on in many key trades Selling vessels may reduce the strain for individual fleets, but the overall fleet size, and therefore the problem, remains

Apart from the obvious cutting of unwanted costs, ocean carriers should review their relationships with customers Whilst carriers have previously boasted about the great relationships they have with their

Customers, Drewry says that reality doesn't bear this out

Drewry believes that if carriers had invested more effort in forging good relationships and treating the negotiating process with more care, then it would be less easy for competitors to poach customers with lower prices

The East-West trade routes are a good case in point where the freight negotiating process between shippers and carriers has not gone well The Drewry forecast of a 295% reduction in all-in rates on this route for 2009 bears this out While this may seem helpful to shippers, it will probably do nothing for service reliability as carriers reduce services and change or eliminate port pairs