Carriers Get their Mojo Back

Tired of being a punching bag, container ship lines seem to be starting 2010 with a new attitude and a new message.

The message: We ain't stupid.

Carriers lost nearly $20 billion last year after rates plunged as vessel supply exceeded demand. Shippers and others said it was the carrierrs' own fault for ordering too many ships just before the economy tanked and global container volume posted its first-ever decline.

At this week's Trans-Pacific Maritime conference in Long Beach, carriers have put forth a different story line. They say their vessel orders were a rational response to widespread predictions of continued rapid growth in global trade and container volume. Carriers say that if they hadn't expanded their fleets, they'd have been harshly criticized for leaving customers short of capacity.

In recent months, carriers have surprised even themselves with the unexpected discipline they've shown by laying up vessels, delaying deliveries and canceling orders to keep supply in line with demand. A recent $400-per-FEU increase has stuck, and carriers say they're approaching break-even on operating costs in the trans-Pacific. Carriers will be looking for further increases in annual service contract negotiations during the next couple of months, and they'll probably succeed.

The carriers' newfound confidence, however, is tempered by hard experience: everyone knows that if they avoid the impulse to add capacity and cut rates at the first sign of profitabiliy, it will be the first time. But for now at least, carriers seem to be determined to prove that they aren't stupid.