Carriers can’t please anyone, much less everyone

Carriers can’t please anyone, much less everyone    Drewry Shipping Consultants has suggested that the ocean carrier industry has not yet fully grasped the severity of the capacity surplus facing it.
   Drewry has for months been suggesting that carriers take a more radical tack in terms of shelving ships, rather than trying to operate half-empty vessels at below-cost rates. The consultancy firm did so again in its latest Container Forecaster, released Tuesday, saying that the age-old race for market share continues to trump sound decision based on profitability. Neil Dekker, editor of the Container Forecaster, predicts firmly that companies will go bust and that experienced personnel will be lost to other industries.
   I don’t have a problem with the conclusion so much as the means to get there. It’s one thing to say to the ocean carriers as a whole that they must reduce significant capacity, but the problem is that there isn’t one ear in which to shout. This is an industry with many egos and many singularly determined people making up their own minds. There are lines that have taken the capacity reduction message to heart — APL and Maersk are two examples — and there are others who have not. The issue, as I see it, is that individual liner carriers are making decisions not in a vacuum, but in a swirling morass of competition and desperation.

'Carriers are making decisions not in a vacuum, but in a swirling morass of competition and desperation.'

   If a carrier didn’t have to consider the impact of competition on his business, it might very well lay up half of its fleet in this market. But that carrier is probably thinking to itself, “If I lay up three ships from an Asia/Europe service, does a competitor with deeper pockets and a stronger stomach for losses come in and take away that business? Even if I do survive by taking this step, where will I be when volumes rebound? My competitor has stolen a march on my old customers and now has a larger slice of the cake with all the economies of scale that come with it.”
   Again, my point is that there is no Jedi Council of ocean carriers that decides to do things for the good of the whole industry.
   Carriers are indeed in an untenable position right now. If they tried to band together to root out excess capacity, shippers and governments would cry foul. If they don’t take out enough on their own, analysts chide them. And let’s not lose sight of the fact that it’s not a pleasant decision to take a $50 million asset and let it collect rust in an anchorage off Singapore.
   “The reality is few, if any, of the actions carried out by the carriers to move away from the current abyss make sense,” Dekker wrote in the Container Forecaster. “Some business leaders privately agree that strategies to protect market share and volume as opposed to revenue are suicidal. Yet they question what options they have.”
   Which is exactly my point. What options do carriers actually have at this point?
   Of course, a lot of the problems carriers are facing today are of their own making, but that shouldn’t distract too much from the hardships they must endure anyway. If lines fail this year, it will be a bad thing for everybody. The whole goods movement family is better off when there are more companies making more orders and transporting more things. If carriers do indeed die, the dominoes will fall somewhere, won’t they?    ' Eric Johnson