Fundamentally, it is a question of Business 101: You lose money, you either close shop or go into a product or market that allows for a proper margin! And this is exactly what has happened in the North Europe/Canada trade.
With the inland arbitrary on par between Montreal and Toronto, a highly unbalanced trade between Imports and Exports and the need to reposition empties, carriers lose money with every single container going beyond Montreal.
Operating costs have gone up exponentially: Ports, Terminals and Railroads all charge more, bunker costs have increased by some 60% and, last but not least, ship charter rates have gone ‘through the roof’, not to speak about newbuilding costs that now reach 100 Mio plus for a container vessel.
So what do carriers do? Simple…. a solid return on assets is fundamental to a viable business and assets are consequently allocated where that return is possible. They go where the grass is, indeed, greener….
The consequences of having a key trade lane abandoned can be devastating for our economy, unless rates and especially inland rates between Montreal/Toronto – will go up to a level where a fair return can be achieved.
For once, this writer is all in favour of a reasonable rate increase, for having to contemplate the lack of proper services on a key trade lane like the North Atlantic is unimaginable!
George Kuhn is Executive Director of the Canadian International Freight Forwarders Association. This column was included with today’s CIFFA bulletin to members.