An organization that represents shippers in many countries around the world, including the U.S. and Canada, has added its voice to those expressing disappointment to a recommendation by the European Commission to renew the consortia block exemption regulation, which gives antitrust protection to container liner carriers who cooperate in vessel-sharing agreements.
James Hookham, secretary general of the Global Shippers Forum (GSF), said, “We are disappointed with the outcome of the Commission’s review and disagree on several points with its reasoning. We shall be setting out our concerns and arguments in response and campaigning for greater policing of shipping lines’ activities.”
The European Commission recommended on Nov. 20 that the block exemption regulation be extended for a four-year period from rather than expiring April 25, 2020 The decision is, however, subject to a four-week “feedback period” running until Dec. 18.
“The Commission looks set to prop up the shipping lines for a further four years without fully understanding why. European manufacturers and retailers, together with their customers and suppliers around the world, as the users of container shipping lines, deserve better support and service from their competition authority,” Hookham said.
The Dutch Shippers Council denounced the decision last week, while it won praise from the World Shipping Council, the principal trade organization for the container liner industry.
The European Shippers Council said earlier this year that the block exemption regulation “has not contributed to better services in maritime transport for shippers as it aimed to” and called for it to be “amended, if not repealed.”
GSF said renewal of the block exemption regulation “while not unexpected, ignores the views of exporters and importers to and from the EU and their global suppliers and customers, who are concerned at continuing poor service levels in some trades served by consortia due to over-investment in capacity and seeming lack of competitive pressures.”
Hookham contrasted the pooling arrangements in the aviation industry with liner carriers’ vessel-sharing agreements.
“Shippers are well used to similar pooling arrangements in the aviation sector, which allows code-sharing arrangements to be established for the same aircraft. But these seem to be fully compatible with EU competition law without the need for a block exemption. What is it about the global shipping lines that warrants this form of exceptional treatment under competition law? We are not convinced by the Commission’s arguments or conclusions,” he said.
“In our view the Commission has missed the opportunity to ask the bigger questions about how the shipping sector got into its current situation of historically low shipping rates and over-capacity on many routes and whether the continuing exemptions from normal competition rules provided by the block exemption are the right remedy in the long term,” he added.
GSF calls itself the” global voice for shippers” and represents the interests of national and regional shippers’ organizations including National Industrial Transportation League in the U.S. and the Freight Management Association of Canada. Other GSF members are in Europe, Asia, South America and Africa.
Antonio Zuidwijk
Dear Mr. Dupin,
E.C.L.A.C/ C.E.P.AL.presented a paper in the recent XXVIII Congress of American Association of Port Authorities with the title:
Ports of Latin America should prepare themselves to receive vessels of 18.000 TEU and 400m.
This was a follow-up of an CEPAL-article of 2010.
I made the following comment to this article:
This issue needs the attention of governments of developing countries.
Before the serious financial crisis of 2008, shipowners began building much larger ships, responding to the high demand of the “cargo”.
The “economy of scale” was applied correctly, since with the larger vessels the cost per transported container was lowered.
But just when the first very large ships left the shipyards in 2009, there was a sharp drop in demand and those ships were actually superfluous.
When these huge ships entered the service on the lines of greatest demand for cargo, between Asia and North Europe, they expelled smaller ships that were on those lines, but those “expelled ships ” were still far superior to the demand of the lines they were sent to by the carriers. (This was called the “cascade/ warerfall” effect).
This “cascade” created serious problems, even for all the ports of the United States and much more for “developing” countries.
The over-capacity of ships that began in 2009 had a disastrous effect on freights and ship owners lost billions of dollars that year.
That is why they decided TOGETHER IN NOVEMBER 2009, to take out 11% OF THE CAPACITY OF THE FLEET OF CONTAINER VESSELS.
This “LAY-UP” remained DURING 2010 and in that year all shipowners EARNED MONEY AGAIN.
But then they began to COMPETE again and little by little they entered again 8% of the 11% that had been out of service.
Since then, shipowners have worked with losses and could only recover a little, taking ships OUT OF ALREADY ANNOUNCED SERVICES, for one or more trips, often causing problems in logistics chains.
History since 2011 shows how shipowners “destroyed themselves” in the competition that has followed.
Since then and to this day, they continued to increase the sizes of their vessels, not because of the need for the”demand of the cargo”or to obtain ECONOMY OF SCALE, because the TOTAL COSTS in the logistics chains INCREASED TERRIBLY.
The competition sought to ELIMINATE “PLAYERS” AND HANJIN WAS the FIRST that went broke, but several others were close to that and needed subsidies from their countries in order to survive.
But the expenses for the new infrastructure and the WORK PEAKS that this caused to the terminals were far SUPERIOR TO the savings in the maritime part.
COST INCREASES IN THE “GROUND PART” ARE OFTEN MUCH GREATER.
And this is what governments in developing countries should ATTACK, THEY SHOULD NOT MAKE HUGE EXPENSES, THAT DO NOT SERVE THEIR COUNTRIES.
Do you think that this can be an addition for the arguments of the parties which are against the extensión of the block excemption rules?
Best regards,
Antono Zuidwijk. azuidwijk@yahoo.com.ar.
http://www.antonioz.com.ar