MSC Chief Blames Customers for Crisis

In regards to non-performance, I would imagine fewer shippers are penalized by the carriers than one might imagine. Should a shipper actually be penalized for a short-fall, how many of those shippers do you think would be repeat customers the following year? The answer is not many. The bottom line is that most of the rate argument boils down to commitment. It was all over the news a while ago when some carriers were moving freight between Asia and Europe for nothing more than a bunker surcharge. No one can attempt to argue that covered all of the operating expenses. It was necessary for carriers to move freight at a loss because suspending a service would be far more devastating in the long run, to both them and the shippers. It would be irresponsible for shippers to rely their supply chain on a carrier who had developed a reputation of suspending service because it was no longer profitable. Carriers invested a lot of money in committing service to their customers during the recession to send the message that they intend on being there for the long haul. I don’t think it’s too much of the carriers to ask that the shippers show the same commitment agreeing to long term rates that are beneficial to both them, and their carriers. Jumping from one carrier to another for a $50 reduction only perpetuates a trade environment of short term commitment, unstable rates, unreliable service, and fluctuating capacity.

Without doubt, shippers "take advantage" of lower rates due to overcapacity issues. Isn't that called supply & demand? If this article is accurate, I am amazed and can now say that I've heard everything. It reminds me of those folks who cling to concepts like rate restoration initiatives...rates aren't works of art needing to be restored to their former glory...they are price points. Perhaps if certain carriers focused a bit more on the fact that they are service providers instead of executing service by tariff they'd be thought of as more than a commodity. I'm sure carriers will pull out the violins moaning about the terrible/irresponsible shippers they have to deal with. And that’s my point…if carriers can’t differentiate between responsible trade chain stakeholders (and offer them a different value proposition based on service ) but instead treat everyone with the same broad brush of the tariff…again, is it a surprise that many of them get treated like a commodity? Carriers that can't offer a value proposition on service only have price to differentiate themselves by. In tight markets they can pat themselves on the back for a job well done but when rates fall (as they will at some point ) these same carriers end up scratching their heads as to why they end up being beaten up in the market. Amazing.

Sure shippers are greedy and take whatever they can get--and carriers don't?

I'd like to ask Mr Aponte how many service contract customers MSC has sued for non performance? Bottom line is that carriers invested like drunks buying drinks on an expense account and shippers simply said "thank you" for the overcapacity. Yes, Shippers are like children but, if you got 4 similarly qualified quotes to paint your garage and 3 of the them were at 500 bucks and one came in at 425- wouldn't you take it? The financial model of container shipping is quite simply broken--most carrier sales calls result in either a claims demand or a rate reduction request. Meanwhile no consequences ever acrue to the the carriers who keep getting bailed out of insolvency eg CMA and Hapag or shippers who never have their cargo arrested in a chapter 7 style bankruptcy.
Until that happens most traffic managers will continue to view carriers as big children selling a commodity, nothing more.

Mr. Aponte has a point, shippers do look for lower rates no doubt. But to blame the current poor conditions in the shipping industry on shippers is - well, specious comes to mind.
MSC's support of non-asset based companies and it's reluctance to reduce capacity while most others are taking drastic capacity reduction actions are clear indications that MSC is trying to grab market share, regardless of Mr. Aponte's proclamations to the contrary.
MSC is not solely responsible for rate reductions, the carriers collectively have a history of self inflicted wounds when it comes to dumping rates and they started doing it in late 2007 and kept it up through mid-2009 when they were put into a survival mode. Managing capacity has allowed the carriers to raise rates, Maersk, APL, CMA, the Japanese and Chinese have all contributed to the capacity management - what has MSC done in that regard? Not much.
But it is good to see someone from MSC finally become public, actually two of their executives spoke out at about the same time last week; Mr. Aponte in Europe and a representitive from Switzerland at the TPM last week.