Something in the water?
In last week’s Article 35 commentary we took note of the TSA’s questionable decision to seek a rate increase in their contract negotiations with shippers. “Automobile dealers and retailers are hurting,” we wrote, “and those that haven’t shut down are having sales events and offering price reductions on everything they have in stock. Price reductions, in fact, have been in effect for some time now – all the way back through the supply chain – right to the manufacturing centers in Asia. But things just keep getting worse. Ask anyone.”
Then further, according to a distressed retailer, “ … continued price reductions will eventually bring my goods within the reach of those who still have some money to spend. That’s the way business is stimulated.”
“But the TSA doesn’t see it that way,” we wrote. Earlier in the week, after declaring that present shipping rates had been reduced to “non-remunerative levels”, the group announced that a rate increase would be forthcoming sometime in April – as though increasing costs to strapped consumers will encourage demand at the retail end.
There must be something in the water. Here’s a random sampling of what the industry is up against:
From American Shipper — “The Icelandic bank Kaupthing issued a report that said the decline in consumer spending will propel rates down, significantly hurting revenue for the world’s biggest container line.
“‘We believe (first quarter 2009) will be a disastrous quarter for Maersk Line, with negative demand growth and a collapse in all-in freight rates of at least 20 percent (year-on-year), and possibly 25 percent,’ the report said. ‘We see dismal trade growth figures ahead, with a clear negative impact on contract negotiation, and we see no immediate positive triggers in sight.’”
From The Associated Press — “WASHINGTON – The U.S. economy was shrinking in the summer and corporate profits were falling even before the financial crisis struck with full force. Analysts are forecasting that those small declines will be followed by much larger decrease this quarter as the longest U.S. recession in a quarter century gains intensity.”
From MarineLog — “In the wake of the global financial crisis, the CEO of the world’s largest provider of shipping finance has resigned. HSH Nordbank CEO Hans Berger handed in his resignation last month because, as he put it, ‘the management board failed to foresee the degree of intensity and duration of the crisis and the risks for the bank’s earnings that have come to light.’ Berger said the bank would ‘post a negative result this year as a consequence of individual capital-market transactions and the general trend on capital markets.’”
But despite these warning flags, the TSA members insist that rates must be increased. Wouldn’t you expect that the executives of those 13 TSA carriers would be reading and heeding those warnings?