Last year, shippers were faced with increasing rates as carriers recovered from profit loss and limited space on vessels as carriers reduced capacity. The hope was that in 2010, things would pick up. Unfortunately, it doesn't look like that will be the case. As discussed in this opinion piece from Supply Chain Brain, carriers will only be adding capacity if they see significant market growth (which hasn't happened yet). Delayed shipments can also be expected, as carriers make service changes to conserve fuel (the on-time deliver rate in 2009 was only 55%!)

Everyone knows that the economic downturn has struck the transportation industry hard, and now some of the world's largest ocean carriers will be getting government bailouts from their home countries. Logistics Today is reporting that Germany's Hapag-Lloyd will receive €1.2 billion ($1.8 billion) in state guarantees, and French CMA CGM is in talks to restructure its debt and could possibly receive funding from the French Strategic Investment Fund.

Bailouts, of course, are always a touchy subject, and this has some groups upset. One of the main opposing arguments, which Logistics Today brings up, is that "subsidies or government support of the carriers will continue the supply imbalance which, says Transport Intelligence, will 'amplify the structural problems of the container sector.'" A valid point. A key reason why logistics providers are suffering is simply because of low demand - consumer purchasing is down, which leads to lower retail inventory turnover, which means retail outlets are ordering less from manufacturers, who in turn need to ship fewer materials. Bailouts to the logistics providers will not do much to address those core problems. However, if a large number of logistics providers are on the verge of going bankrupt, bailouts could help them stay afloat until the economy improves and demand goes back up as people start shipping again, which hopefully won't be very long from now.

When the economy rebounds, we may be seeing a significant rise in air freight shipments. Deutsche Post DHL and the London School of Economics recently published a study that predicted air express industry to get a boost from rising demand for individualized health care, demand for documents transfer in international services industry and spare parts for equipments, claiming a larger share of international trade than it has seen in previous years.

Today, the Journal of Commerce reported that last week, Hyundai took an order for the first container ship in over a year, anywhere in the world! Middle East oil tanker operator, Abu Dhabi National Tanker Company placed an order for two gearless box ships of 1,060 20-foot equivalent units capacity, the first order since October 2008. The number of vessels ordered has been decreasing steadily over the past few years - 208 vessels ordered in 2008 and 545 in 2007, compared to a whopping 1 (so far) in 2009. Hopefully this is a sign that things are starting to pick up.

Although analysts are reporting that economic recovery is just around the corner, there are still significant risks associated with this recovery. Companies who have laid off employees and reduced spending in areas such as IT investment will face a tough road ahead. In a recent study done by AMR Research, 44 percent of executives surveyed believe the biggest risk in 2010 will be recovering from the recession.

As of late, economic conditions have forced carriers to reduce their rates to extremely low levels. Seemingly good news for shippers. However, now many carriers are saying that these rates have sunk to levels that are unsustainable, and they will be forced to raise them again in coming weeks. This could cause a couple of things to happen - first, the carriers could lose business because shippers are unable to pay more at this time for a service they are using less of. Second, if some carriers are unable to survive the recession, there will be fewer competitive options for shippers to choose from.

According to Logistics Management, M&A activity in the transportation industry remained strong in 2008 and we are still seeing a modest deal flow in the first half of 2009, as buyers look to expand their service offerings. Please read the full story here: Merger activity shows vital signs.