Containers lines adjust their business model to cope with market and revenue volatility, and PortEconomics co-director Theo Notteboom, in cooperation with Ahmed Mowafy Fakhr-Eldin, presented a study on how they do so during the annual conference of the International Association of Maritime Economists – IAME 2012, that was held in Taipei, Taiwan.
In recent decades, container trade has been one of the fastest growing segments of the shipping industry. In 2009 global container traffic faced a significant drop leading to difficult times for container carriers. Container freight contracts were ripped up and shippers walked away from their obligations asking for new terms and reduced freight rates. A renewed trade growth combined with measures taken by carriers such as cutting down capacity on some major trade lanes led to a healthy growth and strong profits in 2010. Carriers’ attitude combined with stalling economic growth put a renewed pressure on freight rates in early 2011. The observed freight rate volatility witnessed over the last three years along with the impracticality of the existing freight agreements system have highlighted the need for new measures to face such volatility.
The aim of the study conducted by Theo and Ahmed is to examine carriers’ business model, their behavior and practices and the relation to freight rate volatility along with the measures taken by carriers to face such volatility. The paper focus on carriers’ strategies and the new instruments that emerged recently to mitigate business risks such as the transition from fixed to index-linked contracts and the emergence of container freight derivatives.
You might read – and freely download – the full study @PortEconomics.
The annual conference of the International Association of Marime Economists – IAME 2012, held in Taipei, Taiwan, provided the PortEconomics team the opportunity to present 16 different port or port related studies that progressed over the course of the most resent months – read more & reach the studies: PortEconomics team@IAME2012