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THE
container shipping industry is a cyclical
beast by its very nature. Not only is it
a seasonal business with peak and slack
seasons, it is also highly dependent on
a stable global economy, and it is at the
mercy of the purchasing decisions of its
key players.
It
also is impacted by the rises and falls
in operating costs, the chief of which is
bunker fuel.
When
all these factors are combined in a negative
way it can be a very messy, miserable business
to be in. It also just happens to be the
position that the market is in today, particularly
on the Asia-Europe trade...
What
we have witnessed in recent years is an
unstable, fragile global economy that has
led to a dearth in shipping demand mostly
from Europe and the United States¡Xtwo markets
that the shipping industry relies on for
its profits year in and year out.
This
falloff in demand has done away with the
peak and slack seasons altogether resulting
in a seemingly never-ending slack season.
By some market analysts' estimates this
state of play will remain through to 2014.
To
make matters worse shipping lines have invested
heavily in capacity to the point where supply
well and truly exceeds the weak level of
demand.
On
top of it all the price of bunker is at
a very high level on a historical basis
and carriers are indeed struggling.
So
as we can see, this is clearly a very unstable
market.
CMA
CGM executive officer and member of the
board of directors, Rodolphe Saade, discussed
with this publication some of the ways in
which his company is looking to combat the
current volatile market.
One
crucial aspect of creating a more stable
operating environment, Mr Saade says, is
through capacity rationalisation.
"If
there is too much capacity in a given trade
then there needs to be rationalisation and
capacity will need to be pulled out otherwise
we will be in deep trouble and will be losing
money. So rationalisation is always good,
especially when the market is going down,"
he said.
But
he is also very aware that such rationalisation
must be undertaken on an individual basis,
particularly since the repeal of the block
exemption on liner conferences back in 2008.
One
way that carriers can get some flexibility
in this regard, however, is through vessel
sharing agreements (VSA), of which CMA CGM
is party to on the Asia-Mediterranean and
Asia-North Europe trades with Maersk Line
and MSC, respectively.
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