How much new capacity is enough?
Is the industry jumping too soon with new carrier expansion capacity as the global recovery continues to take space
David Laurine, President
Highmount Logistics
Published: February 24, 2011
Spoiler Alert - resolution to your unanswered questions, or unresolved issues are not likely to follow.
Shipping capacity has been on my mind lately. In the midst of the issues and battles we’re all confronted with on a daily basis, it’s sometimes good to take a few steps back to see the forest and not just the trees. Since we’re all in the business of forest and trees, after all.
I’ve been thinking about the “before and after” picture over the course of the last few years. With all the data available to us these days from so many sources, it’s certainly possible to obtain statistics to justify most any position one might be predisposed to support.
I’ve been thinking about the “before and after” picture over the course of the last couple of years. With all the data available to us these days from so many sources, it’s certainly possible to obtain statistics to justify most any position one might be predisposed to support. However, according to a number of sources – insert your favorite here – wasn’t it just a year or two ago there were +/-300 container ships, +/-15% of the world fleet capacity sitting idle or laid up somewhere? Orders for new buildings were being canceled, delayed and any number of the lines were bleeding red ink, or teetering on the brink of extinction, right? Unless my memory is worse than what my wife says, one might argue the term “doom and gloom” could have been used to describe the general mood of the shipping industry in the fall of 2008.
But now, here in 2011, a random sampling of a recent headlines all seem to follow the same lines: ... new ships of 18,000 TEU, ... secures financing for mega ship order of 13,000 TEU vessels, ... USA import up 23% 10 vs. 09, export up 21%, ... forecasts 14% Trans-Pacific capacity spikes.
In the global big picture, not just in forestry and not just here in North America, it seems we’ve at least clawed back to where we were prior to financial meltdown in ’08.
Although it’s futile and dangerous to myopically look at a short time period and project that too far forward, nevertheless, given the political unrest which is currently focused in the Middle East and the inevitable impact on the price of oil, and also the broader financial challenges in the US and EEC, one wonders how sustainable this financial recovery will be and what the longer-term implications might be of these capacity expansions.
I hope those who have made decisions to expand capacity, whether ships, terminals, canals, etc. are correct in their outlook for the future.
From the shipper/forwarder perspective, it could be argued that the potential for excess carrier capacity might be beneficial as it relates to freight rates. Although I’m not too sure that imbalance really does anyone such good in the long run.
