First, review some of our previous commentaries. The pundits in the shipping industry have had only one thought on their minds – next year’s promises assure next year’s paychecks. The previous article in this volume was a repeat of the spinnage presented to us three years ago to the day.
CEOs were assuring us that “recovery” was a sure thing by the end of that year (2009). It didn’t happen, of course, but they continue to give us the same mullarkey every year – ‘recovery’ is always just a few months away, according to them.
The only one who had his wits about him was Tommy Stramer (RIP). Remember him? He predicted that the giant container ships then being hastily ordered would turn out to be “white elephants” – and did he ever hit the nail right on the head.
Slow-steaming is one of the dumbest things that the industry has ever promoted, and Mr. Stramer can justifiably say, “I told you so!” But it’s the only solution the bigwigs have come up with to avoid laying up their expensive leviathans – and isn’t that a classic example of clutching-at-straws?
After hearing Tommy Stramer’s warnings we began to understand. After a while you could see it coming. Review Articles 6, 9, 15, 22 and 27 in Volume XXVIII, and Articles 2, 8, 14, 17, and 24 in this Volume XXIX – then read this from today’s Cargo Business News:
“Two of top three container shipping lines form tradelane partnerships”
“As the container-shipping industry retrenches in the face of over-capacity, depressed freight rates, and higher fuel costs, France’s CMA CGM and Switzerland’s Mediterranean Shipping Company, the second and third-largest global container-shipping companies, respectively, announced what they termed ‘a broad based operating partnership spanning several trades.’
“The two family-owned shipping firms said in a joint statement that the tradelane partnerships would include Asia-Northern Europe, Asia-Southern Africa and all of South America.
The two liners said that in ‘a certain number of trades,’ they would be able to ‘deploy the best ships in each of their fleets, while increasing the number of ports of call and frequency sailings.’
“‘We are very happy to have signed this broad-based partnership, which will unite our two family-owned companies in the years ahead. This agreement offers us new opportunities to optimize the use of our respective fleets, improve our transit times, and increase our performance,’ said Diego Aponte, vice president of MSC.
“Rodolphe Saade, executive director of CMA CGM Group, said the two shipping lines have ‘followed the same trajectory’ for more than 30 years.
“‘Based on this experience and our shared vision of the shipping industry, we have decided to step up our partnerships, which reflect a commitment to long-term cooperation and will enable us to offer customers improved solutions and services,’ he said.
“So far, market-leader Maersk has responded to the current, challenging, economic cycle for the container-shipping market by announcing capacity cuts, and merging services.
“Maersk has also made various public statements that its competitors should be following suit in a variety of ways, including the chief of Maersk’s parent company, Nils Smedegaard Andersen telling Bloomberg TV that ‘the industry has to clean itself by not placing orders for the [coming] years … and also for the smaller and weaker players, the time has come to leave the industry in my opinion.’
“In the case of Southeast Asia’s MISC shipping line, the company announced it is dropping its container-shipping business altogether after the unit lost $ 789 million over the past three years.
Koichi Moto, president of Japan’s Mitsui OSK Line, which is on course to lose $ 51 million this year, was recently quoted as saying a merger between all three major Japanese container-shipping lines ‘could be an option, of course. At the moment there is no such discussion, but we should be flexible in every way … we roughly studied such a possibility …’
“The CEO of Israel’s ZIM Line, Rafi Danieli, reportedly said his shipping company could be restructuring for the second time in two years with a merger being a possibility, after losing $ 66 million for the third quarter.
“Michael Sirat, chief financial officer of CMA CGM Group, said in a separate statement ‘the market’s current overcapacity, combined with slower demand, is impacting our financial performance. Our size and ultra-modern fleet are enabling us to successfully weather this situation and we have undertaken immediate, solid, effective measures to adjust to conditions ahead of the expected market turnaround in 2012,’ Sirat said.” –
A while ago we wrote, and disseminated, a letter wherein we stated, “As far back as November 2nd, 2004, in our commentary (A Fitting Solution), we cited objections voiced by Secretary Mineta, Mr. Chuck Raymond, Mr. Conrad Everhard, Mr. James Hartung, Mr. Nolan Gimpel and Mr. Neil Davidson, and in a number of articles since then we recalled their opposition and registered our own strong objections to the growing number of mega-ships being built in foreign shipyards.
“In recent months the difficulties foreseen by the above-mentioned authorities have come to pass. As predicted, these large container ships have found it almost impossible to load to a break-even point and have lost valuable time while waiting to reach acceptable load levels. As a result of this inability to load to acceptable levels, shipping lines have been forced to join with rival lines in Vessel Sharing Agreements.” –
So, as far back as 2004, when dark clouds were beginning to gather, only the “corporate fanning of feathers” drove liner CEOs. That, and next years paychecks. But in 2011, for mere survival those stubborn owners are bring forced not into VSAs, but into OSAs, “Ownership” Sharing Agreements.