What's happening in Europe



Looking two years ahead in shipping - will it be same old, or face fundamental change

To perceptive observers it appears that international shipping is going through a period last experienced 20 years ago when the biggest containership was 14,000 TEU.

Then as now, when there were twice the number of ocean carriers as there are today, the refrain was to gain market share and fill slots at any cost in a race towards the bottom in pricing.

Fifteen years later came a lunatic two-year run, the resulting from a vastly overblown Covid scare, which resulted in a mad dash of manufacturers to make what they could and ship as much as they could before another bureaucratic edict came down to shut down a port or an entire industry if someone got the flu.

What argues against the current notions of an almost reassuring drift towards the "old normal" is the growth of the dominant and increasingly domineering regulatory state, long thought of as inevitable yet still incidental feature of international shipping. But it has since become central to life ashore, afloat and aloft worldwide, to the point where it threatens to eclipse free markets and consumer democracy. Ironically, only in Russia is one likely to find liberties once freely exercised in the West only 20 years ago while undesirable features of Red China governance are being adopted in the West.

One can exaggerate the influence of the World Economic Forum, with its futuristic mantra, "you will own nothing and you will be happy". But one cannot deny that governments - including their vast civil service contingents and their overlapping agencies, QANGOs and state funded NGOs - are in agreement with most WEF aims and objectives.

So instead of a broad revolutionary programme once advanced in the Communist Great Leap Forward, today's Deep State accomplishes its ends in bits and bites - here, but not there, not now, but later.

Under the rubric of health and safety, one forbids phosphate fertiliser on which Dutch farmers depend. The California Air Resources Board (CARB) finds truck emissions intolerable so the state government bans sales of trucks that fail to meet new standards.

Pennsylvania's Deep State politburo thinks this is a good idea, so adopts wholesale California's ban on old trucks, introduced as 3,000-page enabling bill on a Friday night before a holiday weekend, and it passes unread on a nod. Canada blocks a pipeline to discourage the use of fossil fuels.

Strangely, corporate giants, traditionally hostile to restrictive regulation, now welcome it, and even demand new rules be rigidly enforced. Why? Because they care about health and safety or the comfort of humpback whales? Maybe. But what cannot be ignored as a motivational factor is that such measures, and the insistence on strict enforcement, prevent the small fry from cheating, that is, availing themselves of recently criminalised options, thus increasing compliance costs and driving smaller outfits out of business.

Booms-turned-busts have been more abrupt and sensational, but rarely has an established industry so tied to the global economy lurched from historic profits to below break-even levels, noted Bloomberg, adding that after Covid’s massive demand shock, the problem of late has been too much supply.

Said Hamburg-based Hapag-Lloyd CEO Rolf Habben Jansen: "I'm certainly concerned about the next 24 to 36 months. We are going to see a downturn.”

Denmark's Maersk, Germany's Hapag-Lloyd and France's CMA CGM have been cutting costs as some fear the slump will last. Some executives are urging against price wars, which contributed to a wave of consolidation and at least one major bankruptcy in the years leading up to Covid.

Said CMA CGM chief financial officer Ramon Fernandez: “Each actor will have to be responsible to ensure that the market remains reasonable amid rates that are relatively low. Price wars after a while hurt not only those who start them but everyone.”

Such concern stems from a combination of economic forces: Goods demand is returning to pre-Covid levels just as supply is rising in the form of new and bigger ships.

CMA CGM's Mr Kovatchev said what’s emerging is a standoff between the strong and the weak. “The bigger companies such as Maersk and Hapag-Lloyd have the cash to wait and focus on cost-cutting, as opposed to aggressive capacity reductions - for now,” he said. “It all boils down to supply, demand and who will blink first.”

Said FedEx Express Europe president Karen Reddington: “We expect external business conditions to be challenging in the near term, and there remains uncertainty with respect to the timing of demand recovery.” 

So much for free market speculation. While so much money is being printed, what hope that lingers is that the cash cornucopia will be forever full, and be something like a World War II spending spree that hoisted the Western economies high after a decade of depression.

But some say that World War II spending roused from its sickbed, a highly disciplined society accustomed to hard times and hard living into a mighty machine. This is not the case today. All that is expected of this soft hedonistic society is that it will vote for the party that will tell them what they want to hear, that is everything is okay and their welfare cheques are in the mail - if you vote for us!

The practical problem with the WEF vision, assuming it is aware of the condition described above, and finds it fit for its purpose, as well they might, is that they are working under a misapprehension. The Elders of Davos, being of a statist socialist inclination, will find having a thoroughly feminized society desirable, docile and fashion conscious if not obsessed.

What is forgotten is that a dynamic society to be successful cannot be universally docile. While docility may be widespread, perhaps commanding a majority, there must be bulls in the China shop free to disrupt because it is through disruption that one begets invention and true progress. To have the bulls roaming free to carry the ball as far as they can in the way they chose.

From what little one can discern of the WEF mega plan, based on what results can be  surmised from their regulatory approach in which they appear to be sculpting society. By forbidding certain activity, or at least making it so expensive that it puts it beyond reach of the less affluent, or reserving choice goods and services for the elect will lead to inevitable atrophy as it did in all socialist societies from the 19th century Brook Farm in Massachusetts to Russia's Union of Soviet Socialist Republics in the 20th century.

If the WEF has its way, following its quasi-communist doctrine, that is "you will own nothing and you will be happy", one can count on less being shipped worldwide. This will be officially praised as less wasteful, so too will competing widgets and gadgets be restricted in the interests of cutting waste. In the WEF world, if one has an invention, one must have it vetted by a board of experts, who may well find it threatens the wellbeing of an established producer, and thus disallowing it or permitted to operate in such a way in which it is bound to fail.

One can see where this is going.

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Do you see a return to the old shipping cycle of a price war and a race to the bottom? Or to you see, as the author fears, more fundamental changes afoot?

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Europe Trade Specialists

Nippon Express (HK) Co., Ltd.
Visible & Strategic Logistics