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Shippers ‘need not fear container shipping alliances’
Published:2018-12-1   Have been here 42   Source:泓威国际物流

Shippers should not fear container shipping alliances, according to container shipping analyst Drewry, which believes operational coordination among box lines has aided competition during a period of market concentration – a process likely to accelerate without the consortia block exemption that is coming under review in Europe.

In this week’s Container Insight Weekly report, ‘Container alliances under fire as consortia block exemption up for review in Europe’, Drewry notes that “cooperation is rife” in the container shipping world, adding: “Despite working in an industry that has often displayed a dark tendency for ruthless undercutting, carriers appear to brush aside any ill-feeling that might be caused by predatory commercial behaviour and generally play well together operationally.”

Drewry notes that there are currently very few standalone container services in the key trades, with vessel-sharing agreements (VSAs) and slot charter deals the standard. VSAs are purely operational co-operative structures that promote efficiency and cost reduction, and do not discuss or agree upon rates or other commercial issues, it points out. They can range in scale from a single service agreement between two carriers to much deeper strategic connections among multiple lines, as seen with the big three alliances ? 2M, Ocean Alliance, and THE Alliance – that cover the East-West routes.

“Importantly, VSAs can allow carriers, particularly medium-sized and emerging lines to offer a competitive service at a lower total investment requirement by operating its ships in tandem with other similarly situated carriers – carriers that in some cases individually may be unable to operate in that trade due to small market shares or limited vessel capacity or financial resources,” Drewry says. VSAs also provide carriers with a way to enhance the range of ports that they cover through the exchange of space between shipping lines that offer a different selection of port calls on a given trade route.

“This has the effect of expanding the range of competitive options open to shippers to and from specific port pairs,” Drewry adds. “Put simply, VSAs minimise operating costs and maximise the number of competing marketing entities, offering a ‘win-win’ solution to both carriers and shippers.

However, a new 100-plus page report ‘The Impact of Alliances in Container Shipping’ by the International Transport Forum (ITF), an OECD think-tank, published earlier this month, challenges that view and argues that in their current form alliances are actually detrimental to competition, Drewry highlights.

“The first generations of alliances allowed smaller carriers to achieve economies of scale, based on complementarity between them, and as such increased shipping options,” the ITF said. “The current three alliances are not serving the smaller carriers but each brings together two to three very large carriers that would be able to offer most of their services outside an alliance.”

The ITF report was published in the middle of a European Commission consultation and review of consortia agreement in European trades, Drewry points out. At present, Regulation 906/2009 offers carriers a block exemption to form joint services so long as they don’t exceed a market share of 30%, although that figure can be legally exceeded under certain conditions, the analyst explained.

The exemption has been in place for over two decades, although it has undergone some refinement over the years, most notably in 2008 when the liner conferences that had the power to set freight rates were abolished, Drewry noted. It gets reviewed every five years and will expire in April 2020 unless renewed.

Acknowledging the changing landscape of the container market following recent mergers and acquisitions (M&A), the EC wants stakeholders to give feedback on whether the block exemption is still relevant and that a fair share of the benefits from these efficiencies ? economies of scale and better ship utilization – are being passed on to users.

“Ultimately, the EC wants to assess if the current block exemption arrangement is still fit for purpose or if shipping can be brought in line with a general policy to harmonise competition rules,” Drewry says, pointing out that the deadline for submissions to the EC is 20 December.

“According to the ITF, today’s alliances have got too big and powerful and place a barrier to entry on East-West trades for independent carriers,” Drewry notes. “They also fear that alliances could be the breeding ground for collusion between carriers, as they provided members with ‘in-depth insights on the cost structures of their competitors’.

“Unsurprisingly, the ITF wants to see the block exemption expire in April 2020 and while it doesn’t expect that would bring about the end of alliances, it believes it would enable greater scrutiny and deter any anti-competitive conduct.”

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