The unexpected swift recovery of the liner shipping industry would bode well for 2011 if it weren’t for the concern – or perhaps even fear – of overcapacity returning with a vengeance. One would hope the catastrophic losses of 2009 would temper any adventurous expansion drives. Adjusting capacity to demand is difficult, especially in liner shipping. The phase-in and phase-out of ships and parking of unwanted tonnage is an expensive exercise.
And so the criticism from some shippers that carriers artificially reduced capacity at the beginning of 2010 to drive up rates isn’t supported by the facts. The tonnage reduction was a result of plummeting demand, a dismal forecast and the need to reduce operating costs quickly. No one, including exporters and importers, expected demand to rebound so quickly. Reactivating a ship isn’t as easy as pulling a car out of a long-term parking lot, but where required we ramped up services quickly to serve the market needs.
The lesson to be learned from the last few years is that economic drivers – be they fuel costs, currency exchange rates or trade developments – change much more rapidly than ever, and the volatility of our business has increased significantly.
The ability to adjust quickly to changing markets will be tested again in 2011, especially in Brazil where port and terminal congestion has reached a critical level. Carriers must cope by deploying optimal ship sizes, investing in terminal projects and streamlining their service networks – in short, adjusting quickly to change.