Major carriers survive downturn with changed outlook: Drewry

DESPITE fears to the contrary, all major ocean carriers survived the global economic downturn by cutting capacity through layups and slow steaming, says this year's Drewry's Annual Market Review & Forecast 2010-11.

"Sixteen of the world's biggest [carriers] will return to profitability this year making an estimated US$5 billion. The question is, will they hold the line?" asked the London based consultancy report.

But carriers cannot expect to enjoy 2010 revenue improvements next year, said the report. The fear now is that a breaking of ranks among carriers could destroy the good discipline that has spared them disaster in what many regard as the worse downturn since the Great Depression.

"Any larger carrier breaking ranks could push the fragility of recovery to breaking point," said Neil Dekker, editor of the report. "Carriers will react decisively by taking capacity out of the system and will not return tonnage in 2011 until demand has shown the required upturn."

Mr Dekker said the maintenance of the positive supply and demand equilibrium next year is dependent on the continuation of this disciplined approach, reported American Shipper. "Layups could be a feature if there is overcapacity returning. By managing capacity at the individual trade route level, they have been able to rapidly improve freight rates and their profitability," he said.

The disciplined approach, said the Drewry report, has changed the relationship between shippers and carriers.

"The basic contract between shipper and carrier should no longer be seen as a straight rate deal," said the report. "A combination of slow steaming, fewer weekly strings and increasing vessel-sharing agreements means that the traditional carrier-shipper partnership has changed forever.

"Shippers and carriers need to think much more creatively and need to work together to provide much needed security in the supply chain. The relationship between the two parties must be repaired and carriers must now look to properly differentiate themselves once again from their competitors."

As no one can predict consumer demand at the retail level, upon all depends, the new relationship is not set in concrete and remains subject to change, according to the report.

"This has a knock-on effect for carriers when determining deployment plans, an enormous task as they try to accommodate growing numbers of 10,000-plus TEU vessels within their global service portfolios," said the report.
(Source:www.schednet.com)