Container shipping's troubles 'self-inflicted'

10/12/2012

The container shipping industry’s poor performance in 2011 and its continued struggles in 2012 are primarily the result of a self-inflicted supply-and-demand imbalance, which triggered intense competition and price wars, according to a new report.

But carriers can recover from losses suffered in recent price wars by adopting more disciplined business practices, according to Charting a New Course: Restoring Profitability to Container Shipping, released yesterday by the Boston Consulting Group (BCG).

The report suggests the industry is harming its own economics by "following misguided practices – especially those affecting capacity and pricing decisions". 

Fortunately, say the report’s authors, carriers have opportunities to address these challenges and improve their performance. 

Ulrik Sanders, BCG senior partner and report co-author, said: “Carriers should not be willing to accept the volatile financial performance they have experienced in recent years. 

“Although it’s true that carriers are exposed to market forces that make profitability hard to sustain, they can overcome these challenges by bringing the right mix of discipline and diligence to each aspect of the business.”

Co-author Dinesh Khanna said: "Carriers can no longer rely on a one-size-fits-all approach. They must decide how and where to compete by analysing profit pools and the cost to serve specific markets and customers.” 

“Ultimately, carriers must stop making decisions primarily on the basis of capacity and utilisation levels," added Lars Fæste, another co-author of the report. 

“The industry must find ways to make money in periods of excess supply by exercising all options to achieve capacity discipline. These actions include not only slow-steaming, idling vessels and scrapping tonnage, but also intelligently pricing service