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International Shipping to Tighten in 2010

by Robert DeVos
Senior Vice President, Business Development, GENCO Supply Chain Solutions

December is a pivotal month for the transportation industry. Holiday shipping is at a frenetic pace. The crops that were harvested, processed, and placed in storage in September are moving quickly from coast to coast. Popular models of vehicles are being sent to showrooms for big holiday sales.

As “the most wonderful time of the year” percolates with activity, shippers spend extra time managing operations, getting loads picked up, and hitting customers’ delivery dates. But perhaps their biggest challenge is budgeting for the upcoming year—setting targets for capacity cost, identifying projects for potential cost savings, and, overall, tightening expenses.

A critical factor in maintaining cost controls is the international shipping market, the conditions of which need to be monitored closely when planning your international budget. Based on information GENCO gathered from several non-vessel-operating common carriers, forwarders, and existing customers, current market conditions show that:

  • Global demand for product is showing small signs of recovery.
  • Imports were up in June for the first time in 11 months; exports rose for the second consecutive month.
  • Export demand in China showed substantial improvement. With increases in three consecutive months (May-July), it’s important to focus on month-over-month results, not so much year-over-year.
  • The combined active fleet of the top 24 carriers has declined 4 percent over the past 12 months. This figure would be higher, but carriers have rationalized the fleet by returning chartered vessels, delaying delivery of new ships, and disposing of older ships.

In some trades though, space is getting tight and carriers are approaching customers for increases where possible.

As such, vendors need to book 7-10 days before cargo-ready dates. These changes are attributed largely to the discouraging financial news in the ocean carrier industry:

  • Container volume is projected to decline 10.3 percent in 2009.
  • Major carriers are bleeding.
  • Maersk reported losses of $961 million for the first half of 2009.
  • NYK Line, “K” Line America, Hanjin Shipping, and APL estimate losses of approximately $350 million for the first half of 2009.
  • Hapag-Lloyd reported losses of over $600 million in the first half of 2009.
  • Zim Integrated Shipping Services needed significant ($350 million) injections of cash from investors/owners.

The combination of these staggering losses and tighter capacities portends future price hikes; in fact, some market predictions indicate across-the-board increases for 2010. Clearly, this will be an area on which to focus when budgeting for the upcoming shipping period.

GENCO International Services

As the economy continues to churn uncertainly, GENCO is taking definite steps to add value and keep costs down for shippers. GENCO is already negotiating rates for the first half of 2010, a move designed to offset the expected jump in prices.

In addition, GENCO’s international procurement services and service management feature a structured process (outlined below) to ensure value in cost containment and service improvement, both premiums in 2010.

So, as the year winds down and budget season heats up, keep in mind that GENCO can help you drive savings while providing exceptional service—and not break the budget.

International Procurement Services

International Procurement Services

More Information

Bob DeVos can be reached at (920) 593-8942 or devosb@genco.com.