As we move into the last week of August, the U.S. importing, exporting and international shipping sectors should be buzzing, almost frantic with activity.
Under normal conditions, or at least those conditions to which we had become accustomed during the 25 years through 2007, ships would be full to overloading. In those halcyon days, carrier sales teams were occupied less with selling and more with calling customers and advising them of how many containers were being bumped from one ship to another or delayed in transit.
No doubt some of this still exists. But based on the many conversations I’ve had with industry friends, keeping sales teams motivated is Job One for most senior sales executives, at least those who still have their jobs.
Customers are in an angry mood as carriers attempt to dig themselves out of the estimated $15 billion (or more) hole they dug for themselves over the past two years. The shovels being used are both novel (capacity reduction) and not so novel. And then there’s slow- and super-slow steaming, which allows carriers to absorb capacity, but at a reduced cost because of significant reductions in fuel expense, by bringing vessel speeds way d-o-w-n -- in some cases, we’re told to as low as 10 knots or less.
Containers are in short supply -- just ask any exporter -- because the low trade volumes of the past two years brought orders for new containers to a virtual stop and it takes time to catch up, no matter what shippers believe or want at this moment. Rates are up because the carriers can charge more when demand exceeds supply.
And, before long, the U.S. will operate like the rest of the shipping world when customers will be obliged to pay for their own chassis as ocean carriers get out of the business of supplying and maintaining that equipment. No one knows just how this will work, who will pay, how the rates will be calculated or who will assume liability. Another fine mess you’ve got us into, Ollie!
Containerized import volumes are up, but only when compared with the dismal numbers of 2009, and they still lag by far the boom days of 2006 and 2007 (although the scent of doom was already in the air in late 2007).
This year’s increasing volumes, and the optimistic voices they have produced, conceal a nasty secret and an unspoken fear: While the growth is real, it’s far from clear whether it’s sustainable beyond the suspected cause of the increase. This suspicion suggests that we are merely seeing inventory restocking that will allow shelves to appear stocked, rather than the major inventory buildup for the upcoming back-to-school and all-important holiday seasons.
Quiet conversations with importers indicate the back-to-school and holiday season orders placed months ago weren’t what they needed to be for any kind of full-volume recovery to occur. Exporters also had hoped for major volume increases, if only because the Obama administration seems to have finally recognized that exports could drive the U.S. economy forward, just as they’ve done in Germany and Japan for decades and for the rest of Asia for the past 20 years or so.
But it takes more than talk to make it so, and government policy has been weak to nonexistent. Too many companies in this country just don’t get it when it comes to selling their products, which are probably competitive (or easily could be) almost anywhere in the world. It will take more than the government’s suggested five years to get our exports up to speed, and my guess is that everything will look different in five years anyway.
So where are we? Although this column sounds gloomy and pessimistic, I don’t feel that way.
This is just my way of pointing out that I think we can do better -- much, much better -- than we’re doing. I have (mostly) great confidence in this country and even more in the skill and innovation and daring (yes, daring; like it or not, whoever came up with the slow-steaming concept is a daring whiz) of my industry colleagues.
We will survive and prosper -- just not yet.
Barry Horowitz is the principal of CMS Consulting Services and former general manager of container marketing at the Port of Portland. Contact him at 503-208-2232, or at firstname.lastname@example.org.