PUBLISHER'S NOTEBOOK

PUBLISHER'S NOTEBOOK

Everyone in the shipping industry is wondering what the future holds after the prospective demise of the Federal Maritime Commission in 1997.

Well, I'm looking into my crystal ball and see some hazy visions.For example, in 1997, mega carriers and their mega partners will offer micro rates to the mega shippers for macro worldwide services. The downward movement of the rates will be sufficiently emphatic to make the mega shippers temporarily ecstatic!

Even so, the big shippers will still worry that someone else is getting a better deal. But, there will be no way they can really find out because rates are no longer part of the public record.

The situation is exacerbated at an industry convention when one big shipper (27,000 containers annually), during a late-evening exchange of ideas at the bar, can't resist telling another shipper what a fantastic deal he has cut with mega carriers A and B. The fact that he has exaggerated a bit does not stop the second shipper from flying into a rage and vowing he'll never again sign another long-term service contract.

At the first opportunity, the irate shipper cancels his existing agreements, his heart filled with distrust, and shops his huge annual requirement for container movements to five mega carriers, one of whom decides he wants 80 percent of the total and quotes his lowest rates ever, successfully winning the deal. The losing bidders all vow they won't lose another big deal like that over a few paltry dollars and they lower their revenue sights.

Meanwhile, several niche carriers begin to feel the pinch from the switch. They used to get 25 percent of big shipper cargo but now it's more like 10 percent. And the rates are lower.

Two niche container carriers go out of business in 1998. The next year, two smaller carriers are purchased and merged into larger carriers.

Meanwhile, small shippers and shippers of low-value goods find it increasingly difficult to move goods when they want. The big carriers are running full with their high-value cargoes covered by confidential service contracts and don't seem quite as interested in their business. After all, the carriers have downsized their sales staffs and customer service departments to compensate for lower rates. At a crowded convention bar, a small shipper hears a big shipper brag that his average rate to Europe is only $1,100 a box.

"We're getting gouged," says the small shipper, reflecting on his $2,200 rate. "We may get priced out of exporting," he laments.

Meanwhile, in 1998, three East Coast port directors are fired because the big 5,500-TEU mega vessels stop at fewer ports.

Overseas, several government-supported carriers seek and receive government subsidies because without them they would go out of business. Several foreign governments quietly coerce their shippers into using national-flag carriers even though they have to pay a higher rate.

"If you don't use our ships, we won't have a fleet," they are told.

By 2001, unemployment in the Philippines has dropped below 10 percent for the first time in recorded history as a result of the fact that 1,226,553 Filipinos are employed crewing the world's fleet.

Hostilities break out between a European and a South American nation over an island, but neither side can get its merchant marine to go into the battle zone because their Filipino crews refuse to confront each other.

The U.S. Defense Department asks Congress for $30 billion to build transport ships because it can't rely on what is left of the American-owned fleet.

By 2003, four huge freight forwarders have evolved in the United States representing most small and medium-sized shippers. Collectively they have become the four largest customers of the container carriers and they exert their muscle, extracting lower and lower rates.

In 2004, Maersk Line buys Sea-Land and Orient Overseas Container Line buys American President Cos.

By 2005, China, South Korea, Taiwan and Denmark own 86 percent of the world's container fleet.

In 2006, booming markets in China and India lift trade volume to the point where demand finally exceeds supply. Box rates rise 40 percent. Ed Emmett, still president of the National Industrial Transportation League, petitions Congress for a return to tariff-filing while suggesting subsidies for Americans who want to buy and operate ships.

"We can't go on being gouged by these foreign-flag carriers," he says.

Suddenly, my crystal ball has completely clouded over. But a face appears.

"Listen, stupid," says the face, "all those ridiculous pictures you've just seen are figments of the collective fears of the industry. They hate change. All you have to do is look at the trade lanes outside the United States. Deregulated shipping works just fine!"

Gosh, a two-faced crystal ball!

If any of you readers out there have your own crystal balls, I'd sure appreciate it if you'd look into them and let me know what you see.

I'm too impatient to wait until 2003 to see what will be.