There are no museums dedicated to freight rates that we know of anywhere in the world, but if you know where to look, you’ll find sobering exhibitions on the shipping economy, and its pricing.
The San Francisco Maritime National Historical Park stretches out on a sloping hill near the Golden Gate Bridge, where the Pacific Ocean waters meet San Francisco Bay, and the park’s Hyde Street Pier juts out to seemingly within arm’s reach of the big container ships working the Pacific lanes.
If you brave the stiff winds hitting the pier, you’ll find several carefully restored 19th century vessels, including a three-masted, square rigger built in Scotland in 1886 named the Balclutha. The elegant ship crossed the Pacific until well into the 20th century and worked along the U.S. West Coast until 1930, barely a generation before the age of containerization began.
Technology and engineering may have improved during the vessel’s working life, but the exhibit makes clear that economics filled the Balclutha’s sails for so long. As the display mounted by the National Park Service notes, quoting from a history “The American Merchant Marine,” sailing shipowners found new uses for the vessels: “The grain of the Pacific slope could not bear the railway charge to the East, but it could bear the ocean rate ’round Cape Horn.”
It’s a striking contrast, as ships built centuries apart come so close together, and it’s especially sobering to watch the container ship procession as the Transpacific Stabilization Agreement sends up what amounts to a distress signal on pricing. Grain may have been “treacherous cargo,” but it was nothing compared to the economics carriers are hauling today.
The TSA’s call this month for new contract rates on the Pacific lanes comes as rates there have fallen to historic lows, down more than 60 percent from last summer, according to Drewry Shipping Consultants, and potentially headed down nearly 30 percent by the end of this year.
The shipping industry is looking at its own very striking contrasts: As the engineering of ships and port operations takes huge strides, the underlying economics of the business is threatening to turn many of those ships into little more than museum exhibits.
Just look at the report last week from OOCL. The Hong Kong carrier has cut its capacity some 8 percent, but its loadings on the Asia-Europe and Atlantic lanes were down more than 20 percent in the second quarter from a year ago. OOCL’s revenue for Asia-Europe trade was down more than 61 percent, and it deteriorated from the first quarter to the second.
It’s a breathtaking decline and, presumably, just one sign of what the entire fleet of carriers is experiencing. And it inevitably raises the question of how long carriers seeing such financial misery can afford to push ships through such markets.
The truth is, if the liner companies don’t get what some of them call “rate restoration,” bankruptcy and consolidation on a large scale seem inevitable. Shippers should hope along with their carriers that they won’t find the results of the new rate negotiations at a local maritime museum.
Paul Page is editorial director of The Journal of Commerce. He can be contacted at 202-355-1170, or at firstname.lastname@example.org.