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Bennett Commentary: Five predictions for 2010 By David Bennett, vice president, global logistics sales,Schneider Logistics International Over the years, I have never been a big fan of celebrating the New Year, but this year that might change as we are finally seeing 2009 come to an end! The transportation industry on a global basis has suffered losses beyond anyone’s forecast and I am quite certain everyone is anxious to put the past 12 months behind them and move forward into 2010. My objective for the first issue of the year is to address this question with five predictions on what we should expect to see in this New Year. In September of 2008 I was in Hong Kong at the time the Dow Jones Industrial Average began moving in the wrong direction at a pace that had many experts saying we were headed towards a modern day “Great Depression.” Over the last 20 years traveling to Asia, I have learned that you can sense the direction of the global markets based on the pulse on the streets in the financial capital of Asia, Hong Kong. Last September it was scary. The sense of confusion, the sense of panic and the overall look of desperation was clear and it turns out the pulse on the street was right. We had a horrible 2009 on most economic fronts. However, I will tell you that the pulse is beating again in China. In October of this year, I was back in Hong Kong and based on what I saw compared to a year ago leads me to believe that we are headed in the right direction. Hotels were full, retail shops were active, restaurants were full, and real estate prices were soaring again. Please do not underestimate the power and influence of what you find in this key market, as Hong Kong remains the gateway to China on many fronts. A recent report on the status of the ocean carriers was eye opening. From a cumulative standpoint, the major carriers operating in the trans-Pacific and Asia to Europe trade will lose over $5 billion. This is not a misprint, and does not include the losses from privately held CMA CGM, MSC, or COSCO, who have not published their losses, so the actual loss in the trade could be an excess of $6 billion. In the last month, we have seen carriers adopt the usual winter capacity reduction program, which has created a sudden shortage of capacity in certain trade lanes, specifically North China. I even had one carrier contact me to ask if I was willing to pay higher rates to obtain needed space! The carriers are reporting that market conditions in Europe are improving at a much better pace than North America, resulting in successful revenue recovery programs. Airfreight capacity in late October and early November is selling at PREMIUM levels with NO GUARANTEE of space. This spike in demand and shortage of capacity could be “artificial” or short lived, but it is enabling carriers to increase rates to meet demand levels. In January 2010, the new regulations impacting Southern California drayage providers take effect under the Clean Truck Program. Customers are now starting to realize that in order to avoid the Clean Truck Fee they must utilize a clean truck under this environmental program or pay extra. How many trucks in this market will meet the criteria as an “exempt” truck? Will this program spread to other markets such as Oakland or New York? Over the course of this year I have written several columns about these issues and the long-term impact of rate levels that cannot be sustained. The following predictions are simply that, predictions on what I see happening. I hope you find them useful as you begin planning your supply chain budgets and forecast for 2010: Prediction #1: Rate levels in the trans-Pacific Trade will increase based on the fact that carriers have lost such a significant amount of money over the last year. Remember the new buzzword, sustainability. Unless revenue improves carriers, will not obtain the financing required to remain in business and when we see carriers leave the trade, you will see rate levels begin to increase at a rapid pace. Prediction #2: A major carrier will not survive 2010. In spite of revenue recovery programs that will be successful, rate levels will not increase to the point where carriers will return to profitability in 2010. While trade conditions will improve, demand will not increase to meet the excess capacity in the trade. Prediction #3: Return of the floating BAF. In the spring of 2009, oil was trading at levels that we all knew would not be sustainable and carriers made the mistake of caving into demands to fix the BAF in service contracts. Oil prices will stabilize between $65 and $85 per barrel giving carriers the ability to demand a floating BAF again. Prediction #4: A shortage of dray providers in the Southern California market will result as drivers are unable to find the necessary financing to obtain an exempt truck. The impact will be a shortage of capacity, which will result in higher costs in this key market. Prediction #5: Customers will shift to different modes of distribution to save money and avoid moving ocean containers inland. Aggressive rates on a port-to-port basis will make this a successful shift. In closing, 2010 will see some improvements in overall trade conditions, but we should be prepared to pay the consequences of the last 18 months.	In This Issue Up Front News, Trends & Analysis New Items Transport Economics: Don’t be so gloomy Capitol Watch: From cargo screening to roadability equipment Trade Tools: A different world of trade in 2010 Supply Chain Chris Steele: The corner and what’s around it Compliance Corner: Hot trade compliance issues for 2010 Tech Trends: Five trends for 2010 Commentary David Bennett: Five predictions for 2010 Gateway Glance Georgia Vietnam The Port Community East Coast Ports 2010: Five things to watch for West Coast Ports 2010: The future of West Coast port productitivy? The Shipping Environment: Five sustainable trends for 2010 Product Review: Cranes Casualties Triple-deck trailer barge snaps towline, tankers leak, Coast Guard ice breaker runs aground ... and much more Final Say Your supply chain dynamics: 2010 crisis? Or oppotrunities?
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Bennett Commentary: Five predictions for 2010