Business today is slowing down under the effect of the global recession. No sector is spared and no country is immune. The dominant reports on the world business news are how resuscitation of straining economies can take place. This has in turn affected the global trade volume, the lifeline of the shipping industry. The truth is that at this moment, the problem of lack of trade is back with us. As suggested by Mr. Kang Shuchun in his speech, the recession has caused increased costs and low volume of business to cover these increased costs.
While addressing the 2008 3rd Global Shipping Summit, he states that this is an issue that must be creatively tackled in light of the internet age. This is a view echoed in the Guardian (December 5th, 2008). The rates have dropped to an all time low that have exporters beaming but have the shippers concerned about business profitability. Shipping costs as low as 11$ per tone of wheat for high sea routes are unceasingly low. Shipping charges are the lifeline of the shipping industry.
With the global recession on, demand for raw materials is on an all time low due to reduced consumer consumption. The simple laws of demand and supply in this effect play against the freighter and have resulted in a whooping 90% reduction in freight charges. This is a crisis. The demand for charter has dwindled by 30% and is predicted to continue to decline as the quiet Christmas period approaches. The statistics all point to a crisis (Millward, 2008). The main concern of a business is to make profit. The main business trade item is freight transport.
In order to do so the shipping company must endeavor to have enough cargo per ship to reduce on its fixed costs, cover its variable costs and still have an excess which becomes the profit. In this respect, the company must strive to fill its shipping capacity. With all the discouraging statistics, fresh approaches must be followed in hope that the situation is only temporary. The issue of concern to me is the freight of the company. The transportation of the freight is the business opportunity that is sought to be exploited by the company.
The problems with the freight are several and are even more magnified with the current situation of the financial markets. The problems include charges for various types, classes and weights of freight, freight insurance, loss and damage to freight while in possession of the company and loss of demand for freight transportation. This last problem is biting in hardest at this period, although it is experienced cyclically depending on type of good and financial climates.