[090111.EN.SEA] The Year That Was: An Overview Of The Lessons Learned In 2010

FROM the lows of 2009 shipping lines have climbed back from the brink of bankruptcy in what could be the greatest recovery in the history of container shipping.  What makes it even more remarkable is that despite the record profits this year, the shipping lines have achieved it in what has been a relatively uneventful year in terms of trade volumes.  The growth percentages from last year have been significant, but relative to the years preceding the downturn, the total volumes expected for the full year is nothing out of the ordinary.  What has changed, however, is the fact that the liner industry is getting smarter about making a profit...  This is not to say that all liner management in years gone by is bad. Of course there are some very shrewd and intelligent people at the helms of many of the shipping lines. But in years gone by, the industry, collectively, have often acted against basic business logic.  In 2010 shipping lines were thrown in the deep end of the pool in a "sink or swim" type of scenario. For the most part they have responded by swimming, and swimming well into more manageable waters.  They learned not to chase load factors, but seek profit instead.  This has long been a problem for shipping lines in slack periods. One carrier drops its rate in the slack season to maintain or increase its market share as demand begins to dwindle.  Other carriers of course respond in kind until all the lines are at roughly the same load factor again, only now they are now stuck with lower revenue for the same level of business.  Most sane people would agree it is crazy to accept less money for the same amount of work. Many of the liner managers we have spoken to over the years agreed.   However, they explained that often their hand was forced when their competitors began to engage in aggressive pricing strategies.  This poor practice is also a major factor in the devastating losses endured by the industry in 2009. In 2010, however, it appears that the carriers learned their lesson.

Source : CSM, 31.12.10.