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CONTAINER
carriers, on the Asia-Europe run, were pushing
hard to sustain occasional gains in freight
rates ahead of the Chinese New Year on February
8 while all the while knowing that these
gains will not last.
Instead
of entertaining such quixotic hopes, what
must be done now is subtract those costs
that unnecessarily undermine profitability,
namely terminal handling costs through total
automation and regulatory compliance costs
through broadly effected by political and
"industrial action", in the trade
union sense of the term.
Like
many others, Fort Lauderdale's Maritime
Executive, on the occasion of what has become
a monthly spike in spot rates, takes the
view that carriers should act now to lock
in higher prices early - as if there was
any chance of doing so.
These
momentary spike in rates, however, are always
short lived. A pattern, again and again
repeated shows that when price increases
are introduced, spot rate rises sharply,
only to fall again when shippers shop around,
and the carriers' sales teams lose heart
and return to the old practice of filling
the ship at any price.
From
what is leaking out of longer-term contract
talks, indications are that longer-term
deals are following the declining trend
in spot rates, perhaps reflecting a "new
normal" of lower prices.
What
is not discussed much in the context of
low rates is the role of low oil, which
appears to be the lynchpin of yet another
"new normal". Nor is low
oil discussed in context of mega-ships,
which unlike the oversupply of panamax and
subpanamax vessels, is here to stay.
The
inevitable steady scrapping of tonnage will
continue from year to year, but the presence
of the 10,000- to 20,000 TEUers will be
a permanent feature of the Asia-Europe trade,
widening their use in America, as shown
by the recent docking on the US west coast
by the 18,000-TEU CMA CGM Benjamin Franklin.
These
giants are no longer the freaks of the sea;
but increasingly commonplace and are beginning
to form the fabric of another aspect of
this many faceted new normal.
As
bunker costs have taken care of themselves
in what appears to be a permanent oil glut,
and crew costs stabilise as bigger ships
appear to need fewer men, these factors
feed into the new normal.
It
has been pointed out that what wiggle room
there was in cost cutting to compensate
for rock bottom rates, has been exhausted.
Except
for two areas where some can be found, but
neither will be easy to tap. One is shoreside
labour, expressed in terminal handling charges.
and the other is regulatory compliance cost.
Both must be confronted. And confronted
is the proper term.
There
is no social justice reason why unskilled
and semi-skilled workers must be paid considerably
more than doctors and lawyers as dockers
are in the United States - or in Europe
where they demand jobs for life as dockers
unions demands. It is not the value of their
services that profits them, but rather their
commanding position at the chokepoints of
world trade.
In
the same way, but less obviously, the ever
growing regulatory bodies accumulate like
barnacles to befoul world shipping, egregiously
pitting larger companies against smaller
ones because only the big boys can pay the
compliance costs, causing smaller players
to disappear, thus enlarging the market
share for larger operators. Regulators compel
all to use costly equipment, which many
do not want. Soon best practice becomes
must practices on pain of fines and even
jail.
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