HOW LOW CAN COST CUTTING GO?
For the last twenty years Wall Street has campaigned that the best companies are the ones who pay the least to suppliers and employees and at the same time who can rip off the customers the most. For centuries shipping lines were experts at charging high rates all the time searching every avenue possible to cut costs. Shipping magnates were like oil barons, they could manipulate governments. When I was a small boy every month in my town of Gisborne, NZ a “home boat” (that’s what we called the English ships which carried our meat and wool back to Britain) would anchor out in the roadstead and lighters were ferry freight over the next three or four days to fill the holds. Then the vessel was off to another secondary port like neighboring Napier to top up before departing for Tilbury via the Panama Canal. Those ships were owned by the Inchape and Vestey families and the venerable publicly owned steamship lines such as Cunard and P & O, the doyens of British industry. They all made money hand over fist by years earlier forming a cartel known as the “Conference Lines”. Going a step further, Lord Vestey even owned farms and meat processing works in Australia and New Zealand and along with Borthwick’s had the biggest chain of butchers shops in the U.K. Talk about vertical integration! Being in shipping until twenty five years ago was literally a license to print money.
Pre-WW Two, every “Home Boat” was crewed by British sailors and the stern of the ship proudly displayed its English name and below it Liverpool, London or Southhampton as the port of registration. After the war, slowly but surely the crews were drawn from Goa in India and the port of registration changed to unknown ports such as Monrovia. In the good old days, every merchant ship was built in Belfast, Newcastle on Tyne or on the Clyde. Once the Japs, through the Marshall Plan, built their shipyards in the fifties it was goodbye to British shipbuilding. Why? Shipping lines were well versed in how to cut costs and little value was ever placed on doing the right thing. Containerization had its affect on the future of shipping but for British companies South Pacific exports and imports were tailor-made for that radical change and so they were able to truly prosper until the conference cartel was broken twenty odd years ago.
Fast forward to today and shipping is on the brink of collapse. From a tradition lasting centuries of shipping lines truly ruling the waves, from Maersk Line down, the future of the industry at it currently stands is now uncertain. The problems inside the airline industry are minute by comparison. The boom times of the new millennium have come to a sudden halt. Just like the A 380, megaships are no longer needed and Korea is still pumping them out by the dozens. One way trade has killed shipping. There is no money to be made out of shipping empty boxes to China to be loaded up with low value junk and where the customer demands a rate in keeping with the low value of the rubbish he is exporting!
Last week it came to a head when the trans-Pacific carriers got together in Hong Kong and all concluded immediate action needed to be taken in order for them to survive the current crisis. As from January 15th, all eastbound freight from China will incur an “Emergency Revenue Charge” of up to $505 per container and $8.00/m3 for LCL. Five years ago they were masters at applying ROC’s (rip off charges!) and now what do we see? The ERC, Emergency Revenue Charge! Thanks to the recession and assholes like Wal-Mart and Chinese exporters, the shipping industry has been brought to its knees. Wow! When I think of Mum and Dad driving my brother and me to Waikanae Beach at night for a Wise’s ice cream and to see a beautiful Blue Star “home boat” brightly lit up in the bay, I can remember my thoughts of awe that Gisborne, NZ, must be the epicenter of the world; because big ships were loaded up with frozen meat and wool for Mother England. Today, ironically, not one English shipping line remains or exists and the remainder of the world’s carriers are all about to go broke; my goodness the world has certainly changed.
Greed brought about the demise of shipping as I nostalgically remember it, only to be replaced by everything, including this very industry, literally moving down to the lowest common denominator. Isn’t amazing we now see a shipping surcharge applied to stave off the total collapse of a once proud industry? Going a step further, and holding back my sarcasm as best I can, don’t we have so much to thank China and other miserable bastards like Wal-Mart for?
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