Drewry: Carriers face ?$20 billion black hole?

Drewry: Carriers face ô$20 billion black holeö    The latest version of Drewry Shipping Consultants' Container Forecaster paints as gloomy a picture as ever of the state of the ocean carrier industry.
   The report says the industry is still too mired in a market share mindset at the expense of scaling back services and laying up capacity to better match supply with weak demand.
   'The bad news for the container shippers is that there is no good news,' Drewry said. 'The green shoots some industry leaders have talked about are wishful thinking.'
   Drewry is predicting a 10.3 percent contraction for container volume by the end of 2009, followed by 1 percent growth in 2010. That amounts to 2009 volume that's 27 million TEUs lower than the volume in 2007. The supply/demand index is forecast at 83.4 this year, dropping to 79.6 in 2010 as more tonnage is added from new deliveries.
   'For one of the most competitive trade routes — Asia/Europe, three years of demand growth have been wiped out,' Drewry said.
   Neil Dekker, editor of the Container Forecaster, said that while business leaders have conflicting views of when a recovery might occur, it should not blur the reality facing ocean carriers.
   'While our numbers are estimates — for example, 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,' Dekker said. 'So we can expect more casualties. We believe that consequently, the basic make up of the industry will change as companies either go bust, amalgamate or shrink, shedding assets and personnel in the process ' hardly a positive if it means experienced personnel will be leaving the industry.'
   In the Container Forecaster, which Drewry releases quarterly, Dekker said that large carriers would do well to look at smaller operators, who have focused on profitability over market share.
   'The business model of some of the smaller operators is proof that companies can operate profitably and are quietly expanding,' he said. 'Larger companies, rather than bemoan the vagaries of an unforgiving market, need to focus on sustainable solutions and try and resist the temptation for looking over their shoulders at market share. A big ask perhaps, given that market share has been the overriding mind-set for 40 years.'
   He said the industry's hope that the summer may provide a respite in terms of stronger demand is 'short-sighted.'
   '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,' Dekker said. '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.'
   He also pours water on the idea that carriers, as a whole, have been as close to their customers as they say they've been.
   'Carriers have previously boasted about the great relationships they have with their customers,' he said. 'For Drewry, again, reality doesn't bear this out. Drewry believes that if carriers had invested more effort in forging good relationships and to treat the negotiating process with more care, then it would be less easy for competitors to simply 'buy' business by lowering prices.'