Issue link: http://digital.nexsitepublishing.com/i/42918
BennettCommentary 13 " on horizon for shipping trade? thought among readers about what we need to prepare for in the shipping industry. So, the question on my mind this month is simple: Are we headed towards a "double dip"? In addition to the economic issues we dealt with in August, as shippers or third-party logistics providers, we encountered the carriers' attempt to recover revenue they gave away this summer as the Peak Season Surcharge was implemented. I had the opportunity to meet or speak Why are we headed down this path again? Did we not learn anything the last time? Rest assured, this time someone on the carrier side will not survive, and while that might be the ultimate objective of some industry leaders with deep pockets, it is not in the best interest of the shippers, and I mean that from a global perspective. We need alternatives as shippers because one size does not fit all. In the month of August we saw further contraction of the carrier base in the in reality, they continue to move every 90 days. favor, sometimes not — but in reality, they continue to move every 90 days. I warned everyone who has taken the time to read this column that the TPS trade was going to adopt the same pricing model that carriers see in the Asia-to-Europe trade. Well, it's here, and this time I think it is here to stay. Carriers have no choice but to lay down capacity again, drop the hook on vessels in Singapore or wherever they can, but the demand simply isn't there to fill the capacity. with several carrier executives over the last week or so and it was sad to hear that we are right back where we were in late 2008, when the financial markets collapsed. Carriers are bleeding money because they have too much capacity in the market. Shippers smell blood like the carriers did last year, so shippers are seeking considerable reductions in this market to offset the tremendous rates they absorbed in 2010. "Rate levels are moving quarterly, sometimes in your favor, sometimes not — but " TPS trade (granted, not big names, but some smaller players who jumped into the market when rates were high are now begging for mercy). At some point, a big name will drop and when that happens, look out — it could get interesting. Some car r i e r s ar e l ike the In other words, we are seeing a "double dip" in the trade that could have a terrible outcome this time around. Additional capacity is coming on quick and demand will not increase at the same pace, so look for another cycle where drastic measures must be taken in order to keep losses at a "reasonable" level as we enter i2012. governments in Europe and now the U.S., which are overleveraged and must create demand or risk failure. Failure is not an option when speaking of major governments defaulting on debt, but it is an option in business. This is a harsh reality and the industry seems to be headed down a dark and dangerous path again that will result in someone falling into default. What can we do to prepare for this "double dip"? For one thing, accept the harsh facts: Rate levels are moving quarterly, sometimes in your From a long-term perspective, I predict carriers in the trans-Pacific trade are, at some point, going to adopt a "port to port" approach and leave the inland move to the shippers. Some larger shippers are ready for this and began aggressively adopting a port transload model; but small and mid-size players are going to be left scrambling unless they adjust to this changing environment. It amazes me we are right back to where we started almost two years ago, but then again, most economic experts have been forecasting this "double dip" — not too surprising, given recent events. My hope is that we turn the corner quickly from a global economic perspective, or 2012 could be very depressing. www.cargobusinessnews.com September 2011 C