Selling Recovery

Selling Recovery

Many of the ocean carriers and third-party logistics companies attending the 9th Annual Journal of Commerce Trans-Pacific Maritime Conference last week said improving retail consumer sales are their best hope for a desperately needed economic turnaround, but the industry itself isn’t providing much of a boost in buying confidence.

One analyst, Mark Page of Drewry Shipping Consultants, dropped something of a bombshell when he said container lines are so anxious to unload unwanted vessel orders that at least one carrier recently paid $35 million to cancel at least one large ship on order.

That’s a pretty good measure of where retail sales stand: When a company is willing to pay $35 million to NOT buy something, it’s hard to imagine that anyone in the transportation business has much confidence in consumer confidence.

But that is where the global freight transport business stands. The shippers, carriers and logistics providers that set up sophisticated, globe-spanning supply chains during the past 15 years now find their well-constructed strategies crumbling before American consumers.

That’s why Dr. Fu Yuning, chairman and managing director of China Merchants Holdings, the largest ocean container terminal operator in China, is focused less on the usual matters of trade and international finance than on the price of homes in the United States. Along with unemployment figures, he says, the home sales prices are having an impact half a world away. As long as home sales prices stay in their downward spiral, he says, there’s no sign consumers have the money to spend on retail goods, but if home sales prices rise, it would signal a thaw in the credit freeze and that new lending is under way.

In the meantime, Fu says, the container-manufacturing wing of his business has stopped making boxes — one more factory line idled, it turns out, by falling real estate values on another continent.

For the operators that have become intertwined in global supply chains — China Merchants, BNSF Railway, Hapag-Lloyd and YRC Worldwide — measures once remote from their businesses now loom incredibly large, and all seemingly point back to the store shelves in the U.S.
The consumers aren’t exactly willing to spend large amounts of money to not buy goods, but the impact is still strong.

One analyst of retail sales in the U.S., Redbook Research, says store sales in February were down 1.6 percent from a year earlier, but that is only the start of the story.

Automobile sales are sliding from already weak levels even though car dealers have been offering the sort of incentives that artificially pumped up sales and cleared out inventories a couple of years ago. Auto sales reached a 40-year low in February, including a 53 percent drop at General Motors and a 48 percent fall at Ford.

Some automakers could take a lesson from shipbuilders and figure out how to charge consumers to not buy the cars, but that would hardly count as the sort of retail sales transportation operators are looking for.

Paul Page is editorial director of The Journal of Commerce. Contact him at 202-355-1170, or at ppage@joc.com.