Drewry’s latest container analysis predicts casualties and continued unsustainable freight rates unless the industry market share mind-set is discarded.

The latest edition of Container Forecaster, the quarterly review published by Drewry Shipping Consultants, voices the opinion that “the bad news for the container shippers is that there is no good news.”
According to Drewry’s analysis there will be a 10.3 per cent contraction for containers by the end of 2009 and this should be followed by a mere 1 per cent growth next year.
For one of the most competitive trade routes – Asia-Europe, three years of demand growth have been wiped out. Drewry predicts that global container handling in 2009 will be 27 million teu less than 2007. This in itself is also bad news for the port investment sector. Reflecting the same picture, the Drewry global/supply demand index, one of the industry’s key measures, is set at 83.4 for this year, falling to 79.6 in 2010.

$20 billion black hole
Neil Dekker, editor of Container Forecaster, commented: “While our numbers are estimates, for example, the price of oil for the rest of 2009 is not easy to forecast, our analysis shows that the container sector is looking at a $20 billion black hole. So we can expect more casualties.
“We believe that consequently, the basic make-up of the industry will change as companies either go bust, amalgamate or shrink, shedding assets and personnel in the process… hardly a positive if it means experienced personnel will be leaving the industry.”
One of the interesting facets of the current container situation is that business leaders seems to have conflicting views with one or two predicting recovery soon whilst others are not so sure.
Dekker stated: “As independent advisers, Drewry is in the enviable position of being able to talk to carriers, shipowners and shippers alike. The reality is few, if any, of the actions carried out by the carriers to move away from the current abyss make sense. Some business leaders privately agree that strategies to protect market share and volume as opposed to revenue are suicidal. Yet they question what options they have.
“For Drewry, that acid test will be whether, in 10 years’ time, the industry will have learned the lessons from the downturn and follow business models that protect profits rather than risk-taking expansion and market share.”

Islands of sanity
According to Container Forecaster, the business model of some of the smaller operators is proof that companies can operate profitably and are quietly expanding. Larger companies, rather than bemoan the vagaries of an unforgiving market, need to focus on sustainable solutions and try and resist the temptation for looking over their shoulders at market share. A big task perhaps, given that market share has been the over-riding mind set for forty years.